Get a Lower Interest Rate
Getting a lower interest rate is by far the most popular reason to refinance a mortgage. If rates are lower than when you got your original loan, refinancing can reduce your monthly mortgage payments. It can also help you save thousands of dollars in interest over the life of your loan.
Switch Your Mortgage Type
When you refinance, you can select a different loan type than the one you currently have in order to reap the benefits of that loan type. For example, if you have an adjustable-rate mortgage (ARM) and the rate is about to increase, you can change to a more stable fixed-rate mortgage. Or if you have an FHA loan and you want to stop paying mortgage insurance, you may be able refinance to a conventional loan without mortgage insurance.
Fund Home Improvements
If you have enough equity in your home, you may be able to do a cash-out refinance. With cash-out refinancing, you refinance your current home loan for more than the amount you currently owe, and keep the extra money to spend on things like a kitchen remodel, new siding, or other home projects you’ve been dreaming about.
Pay Off Your Loan Faster
In most cases, shortening your loan term will allow you to pay off your principal faster. A shorter term often means you’ll have a higher monthly payment, but you’ll likely pay less interest over the life of your loan because you are making fewer payments, and because shorter loan term loans (i.e. 15-year fixed) typically have lower interest rates than those with longer term (i.e. 30 year fixed).