Determining Factors in Refinancing Your Mortgage

There are several factors to evaluate when considering refinancing your mortgage. Among those, consolidation, altering loan terms or changing interest rates rank with the most common. Refinancing all depends on the homeowner’s current situation both personally and financially.  

One reason many homeowners contemplate a mortgage refinance is consolidation. Consolidation can mean a lower interest payment by combining two separate loans. It also helps the homeowner take advantage of low interest rates that may have changed since the original loan terms were agreed upon. On top of all that, consolidation also means one simple monthly payment, which is much easier to keep track of for all those busy homeowners out there.

 While many mortgage loans are stretched over a long time period, 30 years for example, refinancing to a shorter term amounts to smaller interest costs and quicker home equity. Although it will create a larger monthly payment, your loan will be paid off earlier. The specific terms can be negotiated by the homeowner based on their current economic situation, the national economic situation, and the terms of the original loan.

If your mortgage has an adjustable rate, refinancing offers a chance to move to a fixed rate. A fixed rate provides benefits such as helping the homeowner create a more concrete budget. At the time of the loan establishment, it may have been advantageous to use the adjustable rate, as it typically offers a low introductory rate. However, a fixed rate provides the mortgage owner increased security that their rate will not increase and locks it in at the current low rate for the life of the loan.

Some homeowners look to refinance when they need cash out of their home equity. Mortgage owners can acquire a cash-out mortgage refinance; just make sure it is necessary or debt can accumulate rapidly. If you are looking to start a home improvement project or need the cash to pay for a college education, a cash-out mortgage refinance may fit your plans.  If you simply need spending cash or money to pay bills, you may want to reconsider a cash-out mortgage.

Personal changes are another reason to contemplate a mortgage refinance. If you purchased your home and the original mortgage with an ex-spouse, it may be easier on both parties to refinance the home. After a divorce, it may become complicated for two exes to work together to pay the mortgage bill. This will take the spouse who no longer lives in the house off the mortgage, and hold the current resident solely responsible for the mortgage.

If you think a refinance on your mortgage may prove beneficial contact your lender’s office or local realtor for more information. Also, monitor interest rates periodically to be sure you make your refinancing move at the most favorable time.


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