If you need some breathing room—financially speaking—you may consider refinancing your home before the year ends. Refinancing can help you find space in your monthly budget by securing a lower interest rate on your mortgage. You may use the resultant savings to improve your financial situation or handle any pressing needs.
But why make haste and refinance? Here are five reasons why you should refinance before the year ends.
- Lock in the Best Mortgage Rates
Refinancing your home by the end of December carries a benefit to you! Currently, the interest rates are on the decline.
Securing lower interest rates has compounding benefits. Besides lowering your monthly payments, it lowers the final cost of your home.
- Switch Loan Types
If you used an adjustable-rate mortgage to buy your home, you can refinance to a fixed-rate mortgage with attractive terms. Once the initial period of an ARM ends, it puts you at the mercy of the fluctuating interest rates. Refinancing before the year’s end can help you avoid the financial anxiety that may result from fluctuating monthly payments.
Switching to a fixed-rate mortgage with an affordable interest rate not only saves you money but also provides peace of mind. It ensures a smooth homeowning experience by keeping your monthly repayments low and predictable. Refinancing an ARM lets you take charge of your finances while protecting you from expensive rate hikes down the line.
- Tap into Your Home Equity
If you’re running low on funds this holiday season, refinancing your home can keep you from taking on expensive debts. A cash-out refinance lets you convert the equity you’ve built in the home into cash in the bank. It’s a more attractive alternative to selling plus there’s no limitation to what you can do with the funds.
Alongside the holiday treats, you may use the money to upgrade your home, settle high-interest debt, or deal with a financial emergency. Low prevailing interest rates make a cash-out refinance a cheaper and more affordable source of funds when you’re in a crunch.
By availing the money as a lump sum, this refi option ensures you don’t put large purchases on your high-interest credit cards.
- Maximize Tax Deductions
It may seem surprising but paying down your mortgage may lower your taxable income. The mortgage interest deduction lets you write off a portion of the interest payable on your home loan during the year.
Naturally, most people refinance their mortgages to reduce the interest payable. However, a cash-out mortgage may increase the size of your loan and consequently the interest payable.
Ideally, working with a reliable tax consultant can help you maximize your taxable deduction. They can help you itemize your deductions for each month when filing your tax returns. If you refinance your mortgage by December, you can claim the interest paid as a deductible in the new year.
- Improve Your Financial Stature for the New Year
Refinancing your mortgage can help with financial planning. You may refinance your home loan to lower monthly repayment, shorten the loan term, or tap into the equity you’ve built in the home.
Securing favorable mortgage terms during a refinance lowers your homeownership costs. Lower monthly repayments mean you have more disposable income in the new year. You may use the savings to get off debt, pad your savings, or bolster your investments.
Need help refinancing your home? Talk to our experts today!
