Refinancing to Protect Home Equity

Family hugging and protecting their home

As rates change, there are opportunities for people to evaluate their current mortgage to see if there are other mortgage products, or conditions, that would allow them to put more of their payment into the equity of their home, as opposed to the interest they pay. And doing a review of different mortgage products every few years is a good way to make sure you are paying the least amount or using your equity to save you money on other higher interest rate loans.

As an example, you may have a 30-year fixed rate conventional loan that charges 7% and you closed in 2002. Even though you see that interest rates have generally been lower than 7% since 2002, adjustable rates still make you nervous. Perhaps you research a 15-Year Fixed Rate Conventional Loan that charges 3%. You may be able to refinance your 30-year loan to a 15-year loan with a lower rate to pay off your mortgage faster, while not impacting your payment too much.

Or, perhaps you are a bit more risk-tolerant and decided that a 5/1 Adjustable Rate Mortgage had a great rate in 2009. The first five years were great because rates were around 5% and you paid this fixed rate. Then in 2013, rates were even lower and your rate adjusted downward, but you’ve recently heard that interest rates could climb and you want to lock in a low rate now. You can try a 15 or 20-year fixed rate mortgage to protect the lower rates you’ve become accustomed to, and continue to build equity in your home.

Advantages and Disadvantages

Here are some of the advantages and disadvantages of refinancing to protect the equity in your home.


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