With interest rates steadily on the rise, refinancing a mortgage right now may seem counterintuitive. However, many property owners will find significant short-term and long-term benefits to refinancing, even as rates continue to creep up. Learn more about refinancing in 2023 so you can explore the options and make an informed decision.
Refinancing lets property owners replace their current mortgage with one that is more optimal for their financial needs, whether their objective is to make a lower monthly payment, adjust loan terms, or tap into the equity they’ve built. Cash-out refinancing and rate and term refinancing are the two most common types of refinancing that lenders see.
- Cash-out refinancing: For property owners who have built equity in their home, a cash-out refinancing lets you gain access to that capital. The new loan principal will be greater than your current mortgage balance, allowing you to cash in on the difference. That money can be used for home renovations, debt payoff, or investments — real estate investors will frequently opt for a cash-out refinancing to reinvest their capital in a new property. Even if refinancing at a higher interest rate, being able to invest or pay off higher-interest debts could be worth it in exchange for a slightly higher monthly mortgage payment.
- Rate and term refinancing: If you’re looking to accelerate or delay your mortgage payoff, change your monthly payment, or adjust loan terms, a rate and term refinancing could be right for you. One of the biggest reasons to choose a rate and term refinance is to make the switch from an adjusted-rate mortgage (ARM) to a fixed-rate mortgage (FRM). As rates continue to rise, switching to a fixed-rate mortgage can save you a significant amount of money in the long-term.
Weighing the benefits and risks of refinancing is critical, and consulting with a qualified real estate attorney throughout the process will allow you to gain expert advice and ensure your assets are protected.
To explore your refinancing options or seek guidance on other real estate law matters, contact us.
Related practices: Real Estate
