1. Lower Payments
To reduce your monthly payment you can refinance to secure a lower interest rate or extend the term of the loan. If you choose to extend the term of the loan you may be faced with paying more in interest during the life of the loan.
2. Pay Down Mortgage Quickly
You may choose the option to shorten the length of your mortgage by reducing the term of the loan. Although your monthly payments will go up, you will save more in interest payments.
3. Changing Loan Program
Converting an Adjustable Rate Mortgage (ARM) into a Fixed Rate Mortgage (FRM). With Adjustable Rate Mortgage you are always uncertain and never know what to pay month to month with interest rates always fluctuating. Switching to a Fixed Rate Mortgage means your monthly payments will remain the same.
4. Debt Consolidation
If you have enough equity in your home, you can refinance and borrow more than the current loan balance. With the additional money, you can pay off high interest debts such as credit card balances or installment loans. Keep in mind the total cost of debt by adding it into a 30 year mortgage payment.