Is It Time To Refinance Your Mortgage?
Refinancing is when you apply for a secured loan in order to pay
off another different loan secured against the same assets,
property etc. If your original loan had a fixed or adjustable
interest rate mortgage which has now declined
considerably, then you would certainly want to inquire about a
more favorable interest rate.
When is Refinancing an Option
Typically home refinancing is done when you have a mortgage on your
home and apply for a second loan to pay off the first one. While
taking the decision to go for the home refinancing option, it is
important to first determine whether the amount you save on
interest balances the amount of fees payable during refinancing.
Benefits of Home Refinancing
Imagine a scenario where you can have access to extra cash, while
simultaneously lowering your monthly mortgage payment. This
dream can become a reality through mortgage refinancing.
A house is the largest asset you may ever own. Likewise, your
mortgage payment may be the largest expense you'll have in your
monthly budget. Wouldn't it be great to use this asset to reduce
your monthly payment and put extra cash in your pocket? When
you refinance your mortgage, you can take advantage of the equity
in your home and enable this to take place.
Lower Refinance Rate, Lower Payments
When you purchased your dream home, the financial
environment at that time dictated your interest rate. While
certain factors, like your credit rating and the amount of the
down payment that you were able to afford, influenced your
interest rate, the single most important factor was the
prevailing rates at that moment. However, interest rates
fluctuate. By refinancing your mortgage when interest rates are lower,
you can exchange a higher interest rate for a lower one,
which, in turn, will lower your monthly payment.
Shorten the Length of Your Mortgage When Refinancing
Another advantage of home refinancing is that you can
shorten the term of your mortgage. Let's say, for example,
that you originally had a 30-year mortgage and have been
paying it for eight years. Thanks to mortgage refinancing,
you can switch to a shorter term of either 10, 15 or 20 years.
This can save you thousands of dollars of interest. You will
build up equity in your home more quickly, because more of
your payment will be going towards principal.
Exchange an Adjustable Rate for a Fixed Refinance Rate
When interest rates are low, adjustable rate mortgages
(ARMs) are the housing market's darlings. However, as
interest rates increase, that adjustable rate may not look as
sweet. It's also possible that you opted for an ARM because
your financial future was less secure, or you weren't sure
how long you'd stay in your home. If, however, you've become
financially stable and know that you'll be staying in your
home for several years, it may be beneficial to swap that
fluctuating adjustable rate for a fixed one. You'll have more
security knowing that your monthly payment will remain
steady, regardless of the current market environment.
Access to Extra Cash - Cash-out Refinancing
One way to put more money in your pocket is to tap into the
equity you've built in your home and do a "cash-out"
refinancing. In this scenario, you can refinance for an
amount higher than your current principal balance and take
the extra funds as cash. This can provide money for remodeling your home, paying off
high-interest rate bills, or sending your kids to college.
Bye, Bye PMI
If you were unable to make a down payment of 20 percent
when you purchased your home, you may have been required
to purchase Private Mortgage Insurance (PMI). If your
house has appreciated since then, and you've steadily paid
down your mortgage, your equity may now be more than 20
percent. If you refinance, you may no longer need PMI.
In many ways, your house is like a cash cow. If you have
discipline and knowledge of the benefits of refinancing, you
can tap into its milk for years to come. Call us today and let
one of our knowledgeable mortgage loan professionals help
you determine if a refinance is right for you. |
