Tamara Bodrick: Hi! I am Tamara with Wells Fargo & Company. When interest rates drop, refinancing maybe the right choice for your financial situation and you could end up saving a lot of money.
Consider the following advantages of refinancing to a lower interest rate, increased monthly cash flow, the opportunity to have more money to invest in retirement savings, college savings or pay off higher interest debt.
Your loans' monthly payment typically decreases with the lower interest rate; it may decrease a lot and provide you with more cash every month. With a lower mortgage payment you can use the extra funds for retirement savings, paying other debts, saving money for college or other purposes.
There is also the potential to switch to a different loan type that can save you money or pay off your mortgage sooner. If you have an Adjustable Rate Mortgage (ARM) or a balloon mortgage, reduced interest rates may make a fixed rate mortgage more desirable.
Especially, if you want the stability of an interest rate that does not change over time. If you have a long time left on your mortgage, lower interest rates may make it possible to switch to a shorter-term mortgage. You can pay the principal balance down and build equity faster. You may pay less interest over the life of the loan with a shorter term loan.
If you have a jumbo mortgage loan, you could reduce the interest rate and monthly payment by refinancing to something called a Blended Jumbo. And finally there's an opportunity to access your home's equity. While you're mowing your interest rate you may want to consider using your home's equity to pay for major purchases or to make home improvements. This type of loan is known as Cash out Refinance.