Benefits of refinancing mortgages
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Benefits of Refinancing Mortgages If you current mortgage loan is on the higher side, you can consider the idea of refinancing it with a lower rate of interest, and other better terms and conditions. If you plan well and get a good refinancing deal, you could well end up saving thousands of dollars on your mortgage. This is especially true for those homeowners who are insecure because they have an Adjustable-Rate Mortgage (ARM). There are certain terms and conditions that a homeowner has to fulfill to qualify for a refinancing option. A good credit score is one of the most important prerequisites for qualifying for a refinance. A number of people take the decision of refinancing mortgages to cut down on their monthly installments. A high monthly payment can easily be reduced if the refinancer offers favorable terms and conditions. The following example will elucidate how refinancing a mortgage can help in reducing your monthly payments. Joe had taken a $200,000 mortgage loan in 2010. The rate of interest was 4.5% and the term was 15 years. According to the agreement, Joe had to make a monthly payment of $1,560 towards the home loan. In March 2014, Joe refinanced his mortgage with another financial institution. He arrived at this decision after taking into account the fact he could do better with a lower monthly payment. According to the new mortgage plan, Joe gets a 30-year term at 5%, bringing his monthly payment down to $1,074. One important thing to remember is that although Joe might pay lesser every month, he pays more over the course of the loan. He will also have to pay additional charges, such as appraisal fees, refinance fees, etc. There are still a lot of benefits of refinancing a mortgage; let us take a look at them. Change in Mortgage Plan Refinancing a mortgage gives homeowners the option of changing their mortgage plan. Sometimes, many homeowners are stuck with an ARM mortgage that has high interest rates. Refinancing a mortgage can give homeowners an opportunity of switching from an ARM mortgage to a fixed mortgage. Also, homeowners who want to extend or reduce their loan term can also do it by refinancing their mortgage. Cash Benefits A lot of refinancers give homeowners the option of cashing-in the equity of their home. If you cash-in for home remodeling or say, paying for your child’s education, refinancing can work very well for you. However, you need to keep in mind the fact that by doing it, you are killing the equity in your home. With a new mortgage plan, you will have to start building equity from scratch. These were a few benefits of refinancing a mortgage. Before you arrive at a decision, it is important to consider all the pros and cons of refinancing a mortgage. The scenario for every homeowner is different and a tailor-made approach might not work for everyone. Therefore, put in the effort to look at all options of refinancing and make an informed decision.
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Transcript of Benefits of refinancing mortgages
Benefits of Refinancing Mortgages
If you current mortgage loan is on the higher side, you can consider the idea of refinancing it with a lower rate of
interest, and other better terms and conditions. If you plan well and get a good refinancing deal, you could well
end up saving thousands of dollars on your mortgage. This is especially true for those homeowners who are
insecure because they have an Adjustable-Rate Mortgage (ARM). There are certain terms and conditions that a
homeowner has to fulfill to qualify for a refinancing option. A good credit score is one of the most important
prerequisites for qualifying for a refinance.
A number of people take the decision of refinancing mortgages to cut down on their monthly installments. A
high monthly payment can easily be reduced if the refinancer offers favorable terms and conditions. The following
example will elucidate how refinancing a mortgage can help in reducing your monthly payments.
Joe had taken a $200,000 mortgage loan in 2010. The rate of interest was 4.5% and the term was 15 years.
According to the agreement, Joe had to make a monthly payment of $1,560 towards the home loan. In March
2014, Joe refinanced his mortgage with another financial institution. He arrived at this decision after taking into
account the fact he could do better with a lower monthly payment. According to the new mortgage plan, Joe gets a
30-year term at 5%, bringing his monthly payment down to $1,074. One important thing to remember is that
although Joe might pay lesser every month, he pays more over the course of the loan. He will also have to pay
additional charges, such as appraisal fees, refinance fees, etc.
There are still a lot of benefits of refinancing a mortgage; let us take a look at them.
Change in Mortgage Plan
Refinancing a mortgage gives homeowners the option of changing their mortgage plan. Sometimes, many
homeowners are stuck with an ARM mortgage that has high interest rates. Refinancing a mortgage can give
homeowners an opportunity of switching from an ARM mortgage to a fixed mortgage. Also, homeowners who want
to extend or reduce their loan term can also do it by refinancing their mortgage.
Cash Benefits
A lot of refinancers give homeowners the option of cashing-in the equity of their home. If you cash-in for home
remodeling or say, paying for your child’s education, refinancing can work very well for you. However, you need to
keep in mind the fact that by doing it, you are killing the equity in your home. With a new mortgage plan, you will
have to start building equity from scratch.
These were a few benefits of refinancing a mortgage. Before you arrive at a decision, it is important to consider all
the pros and cons of refinancing a mortgage. The scenario for every homeowner is different and a tailor-made
approach might not work for everyone. Therefore, put in the effort to look at all options of refinancing and make an
informed decision.
