There are many obvious motives that will compel you, the homeowner, to refinance. Several factors make a mortgage refinance beneficial, such as securing a lower interest rate, your changing personal life, consolidating multiple loans, or receiving cash for your home equity.
Many home loans last for several decades, leaving time for many unforeseen changes in a homeowner’s life. Unfortunately, a divorce can greatly affect a mortgage if you and your former spouse originated the mortgage together. In the event of a divorce, refinancing can either allow you to be the sole person responsible or remove yourself from the mortgage. Following a divorce, you no longer count on your spouse for much, if anything; they are not helping with household chores so avoid counting on them to pay the mortgage.
Consolidation is also another common factor in deciding to refinance your mortgage. Combining two separate loans may construct a lower interest payment. Also, one bill is easier to manage than two separate payments.
There comes a point in many homeowners’ tenure when they decide to invest in home improvements or a college education for themselves or their children. If you decide to do so, and need the cash to get it started or completed, a cash-out mortgage refinance may be helpful. However, this type of refinance can be dangerous if unnecessary, as debt can pile up quickly, so make sure you really need the cash. Get the cash for something important, more than simply spending money.
There are two common rate methods that are used for mortgages; a fixed or adjustable rate. When establishing a loan, an adjustable rate makes more sense because it usually provides a low introductory rate, but later in the life of the mortgage, it may make more sense to take on a fixed rate. A fixed rate offers more financial security when building your budget and preparing for future expenses.
A mortgage refinance can also be used to change your mortgage’s terms. Even though it may increase your monthly payment, shortening the life of the loan decreases interest payments both short-and long term. It also helps you speed up the home equity you earn. Paying off your loan sooner than originally expected saves money in the long run.
If you think a refinance fits your current position, talk to your lending office or local REALTOR about the options that are available to you.