Are you planning to refinance your mortgage? If so, it’s a great decision because there are a wide range of benefits you will get from doing so. There are times when it is advisable to do the refinancing, but you need to understand clearly all the financial objectives and keep them in mind. Here are the benefits you can experience when refinancing your mortgage:
Reduce your monthly payment
If the mortgage rate is currently lower that when the home was financed, the monthly payment will reduce if you decide to refinance the mortgage. This means you get extra money to spend for other expenses at home. In most cases, the entire closing costs of the initial loan can be put into a new loan, meaning that you will end up spending less money from your pocket. Even if the interest rate goes down by a half of a percent, this can make a great difference that you will be able to notice.
Build equity quickly
If you are able to make monthly payments that are higher than usual because of an increased salary or any other fortune, you can switch from a 30-year mortgage to a 15- or 20-year mortgage. This gives you an opportunity to build equity fast and save extra money on the financing fees. In other words, you build equity at a quicker rate without having to put out substantial amount of money monthly. That may be when you want to consider bi-weekly refinancing options.
Change the type of the loan program
As a homeowner, you may have the desire to change to a fixed rate mortgage after you begin with an adjustable rate mortgage because of its stability. Due to the fact that the interest rates are always going down, the initial deal becomes less attractive. You may decide to change your loan program so that you can capitalize on the available rates that are best for you at the moment. If your adjustable rate mortgage is adjusting, this is a good reason for you to refinance in order to get a loan that has a fixed payment period. The period can range from three to fifty years.
If you want to get better credit scores, then refinancing is a great way to help you achieve this objective. If your credit score has improved because the mortgage payments have been made at the specified time, you may be able to take advantage of that improved credit by refinancing to a loan that has decreased payments.
Debt consolidation that will result in a reduction of your credit score is another major reason for cash out refinancing. You can use the money from cash-out refinance to make payment of other bills, for example, credit cards. This is similar to transferring the debt into the mortgage. Mortgage rates are lower compared to that of credit cards so your monthly payment will reduce.
Make use of home equity
You can cash out refinance loan to tap into the equity that is already built up in the home. You may want to consolidate debts and pay off all the credit cards accounts, pay for your kids’ college tuitions, or make home renovations.