If you buy a home in New York and get a mortgage to do so, you may want to refinance your loan at some point in the future, and there are many reasons why it makes sense to do so.
Get a lower rate
Mortgages are long-term loans, with many of them having 30-year terms. During that period, interest rates can fluctuate by several percentage points up or down, and if rates go down significantly, you may want to refinance to get a lower rate and save money. You generally don’t want to refinance unless you can lower your rate by at least a percentage point, and you also want to make sure you will be in your home long enough to at least break even on the closing costs you have to pay.
Tap your home equity
Over time, homes usually appreciate in value, and as you pay down the principal value of your loan, you will have equity in your home. One way to tap that equity in your New York home is to do a cash-out refinance, which involves taking out a loan that’s larger than what you owe on your current loan. That allows you to use the additional money that’s not needed to pay off your old loan for whatever purpose you want.
Convert variable rate to fixed rate
If you took out a variable-rate loan, you likely will at some point want to convert to a fixed-rate loan to provide stability and eliminate the risk of large increases in your interest rate. Refinancing is the way to do that.