5 Advantages Of Refinancing Your Mortgage
If you are considering refinancing your mortgage, there are a number of factors that you'll need to ponder before making a final decision. There is no right or wrong answer to the mortgage refinancing question, but by reading on to learn more about the most important advantages, you can make an informed choice.
1. Lower Monthly Payments
Mortgage payments are typically the largest month to month expense for homeowners and those who are struggling with cumbersome interest rates and steadily increasing payments are able to refinance their mortgage for a more favorable monthly rate. Financial situations can change in the years following the initial agreement and with refinancing, a new monthly payment plan can be established that will reflect any significant change to a homeowner's lifestyle.
2. Reduction In Total Interest
The interest rate on your mortgage can be lowered by refinancing, but your ability to obtain a decreased rate also depends on the terms of the loan that you've established. The terms of the original loan, refinancing costs and the interest rate all play a role in your ability to reduce your total level of interest. When you have decided to refinance your mortgage, be sure to take a moment to calculate the refinancing costs, as well as your total payments, so that you can paint an accurate picture of your true savings potential.
3. Paying Your Mortgage Off More Quickly
While some will seek a mortgage refinance because of dramatic changes to their financial lifestyle and seek a lower payment, those who have obtained higher compensation from their employer since making their initial purchase may decide that it is in their best interests to increase their monthly payments. The terms of a mortgage agreement do not always allow the homeowner to pay more each month and refinancing allows for higher monthly payments and the ability to pay a mortgage off much sooner.
4. Unlocking Equity
One of the most common reasons for a mortgage refinance is an inherent desire to unlock added equity in the home. Applicants are able to receive a line of credit, which is based on the amount that has already been spent on the mortgage, in addition to the value of the residence. Borrowing from a home's equity is a great way to foot the bill for any number of expenses, whether you are in the process of home renovations or sending your children to college.
5. Debt Consolidation
Should a homeowner decide to refinance, they can consolidate their credit card loans and personal loans onto their monthly mortgage payment. By combining all of these payments, it becomes much easier for a homeowner to manage their financial responsibilities and make timely payments on their loans each month.