Description: Know the probable reasons why you should go for refinancing your existing mortgage.
Why should you go for a refinance home loan?
When it comes to going for a refinance home loan, it is better that you have a plan, i.e., a strategy for accomplishing some particular goals and securing your financial future. You might need to refinance your existing mortgage for a variety of reasons.
Irrespective of your present financial condition, you must take your time to assess all probable solutions with the aim of coming up with the best strategy. On certain occasions, a refinance home loan works as the best option for you and on other occasions, there is something else that would work even better.
Given below are some feasible reasons for refinancing your home:
1) Reducing your monthly mortgage payments
Refinancing your existing mortgage can reduce your monthly housing expenses. If you can qualify for a rate which is less than your current rate by just 3/4th of a percent, you would see a substantial reduction in your monthly mortgage payments. For getting a good rate on your refinance home loan, it’s also essential that you have a good credit score. If the market rates go down, then it’s obviously the right time for refinancing.
Apart from interest rates, you can also extend the repayment term to lower your monthly payments. For instance, if you have a 15-year loan, you can stretch it out to 30 years and save thousands of dollars. If you have a traditional mortgage with interest and principal payments, you can switch it to an interest-only mortgage and save money on your monthly payments.
2) Paying off your credit card debts
On many occasions, the interest rate on a credit card is considerably higher than that of a home loan, which signifies you’re paying more than necessary on interest. Selecting a refinance home loan to pay off your credit card debts enables you to efficiently reduce the interest rates on your debts. You shift the debts from your credit cards to your home loan. However, this would only make sense if your credit card rates are more than that of your loan payments.
3) Accessing money
You need money for various purposes like your children’s education, unforeseen medical expenses, home improvements and so on. No matter what your need is, you can go for a cash-out refinance by using your home equity. You can borrow an amount which is higher than your present mortgage balance and retain the extra cash. Here you’re basically borrowing against your home equity.
4) Acquiring an FRM
It is evident that a fixed rate is more appealing than an adjustable rate, which indicates the present economical status. A homeowner who has a fixed rate home loan can more conveniently make plans for his financial future since he knows that his monthly payments wouldn’t change over time.
On certain occasions, refinancing your home can imply switching from an adjustable rate to a fixed rate, which is more attractive.
In contrast, if you plan to stay in your home for a limited period, it is better that you don’t go for a fixed rate payment. In this kind of a situation, you would be paying a higher rate of interest over an extended time period when you don’t intend to keep the property for a long time. In these circumstances, a homeowner can shift to an ARM to save money in the meantime.
There might be different reasons why you’re thinking about refinancing and this can be a beneficial option if you evaluate various aspects of refinancing and make a wise decision.
