Just a few decades ago, refinancing a home loan was relatively unknown. Most people decided to buy a house, got a 30 year, fixed-rate mortgage, and made monthly payments until the loan was paid off. Times have changed, however, and in today’s mortgage market, most new loans are more likely than not to be refinanced sooner or later. Today the average loan, even one issued for 30 years, is unlikely to last more than 30 years, as owners often exchange one loan for another one.
The reasons are many, and all of them are valid. Here are a few of the circumstances under which an owner might wish to refinance his or her home loan:
Get a fixed interest rate – Three or four years ago, interest rates were at or near historic lows. Rather than lock in long-term with a fixed rate, many buyers decided then to go with an adjustable rate loan, which had lower payments and allowed them to buy more house for the same amount of money. As rates have been steadily rising since then, many of those buyers now want to convert those adjustable loans to mortgages with fixed rates.
Lower interest rate – When rates drop, borrowers often want to exchange loans...
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