4 Reasons Refinancing Makes Sense Even With Rising Interest Rates

Interest rates have spiked recently, making homeowners second-guess refinancing. However, there are still plenty of reasons that refinancing makes sense for your individual situation.

1. Home Improvements Can No Longer Wait.

If you need some extra cash for home improvements that just cannot wait any longer, refinancing your home can be a great way to get it. By taking out some of the equity you've built up in your home, you can finally replace that old roof, add extra insulation to reduce winter heating bills, or build an addition to make room for a growing family. Sometimes there are home improvement projects that cannot out-wait the economy.

2. You Have an ARM.

If you have an adjustable-rate mortgage (ARM), refinancing into a fixed-rate loan can protect you from rising interest rates. While an ARM typically has a lower interest rate initially, it fluctuates. Sometimes an ARM is matched to the current interest rate. Other ARMs, however, are the current interest plus a few additional percentage points. Refinancing into a fixed-rate loan, even at a higher rate, can help control your costs. 

3. Credit Card Debt Is Crushing You.

Credit card debt is often expensive. The interest rates can be in the double digits, and paying the minimum gets you nowhere. While mortgage interest rates may be high, they are nowhere near the rate you are likely paying on your credit cards. So if you are over your head in credit card payments, refinancing your home to pay them off may make the most sense for you right now.

4. You Are Getting Divorced.

Divorce happens, and while many couples sell the family home, there are occasions where one spouse chooses to buy the other out. Refinancing lets you take equity out of the home to pay your former spouse their fair share of its accrued value and removes their name from the existing mortgage. The new, refinanced mortgage would be solely in your name, and you can move forward with your life.

Key Takeaway

Higher interest rates are only temporary—they won't be high forever. In fact, if rates drop significantly over the next several months, you can refinance again to lower your monthly payment and lock in a better rate.

Higher interest rates may have put a damper on your plans to refinance your home, but there are still situations where it makes sense. Whether you need to make room for an expanding family or get a divorce, refinancing can save you money in the long run. Just be sure to compare different lenders and shop around for the best rate before making a decision.

Reach out to mortgage refinancing services to learn more.