Discover Ways Mortgage Refinancing Can Help You
There is a common misconception that mortgage refinancing is simply a way to avoid foreclosure when you're experiencing financial trouble. This misconception can be costly because mortgage refinancing is much more than just a way to avoid defaulting on a home loan. You can refinance when:
i) Market Rates are Low
Interest rates normally fluctuate from time to time. When you procured your home loan, the prevailing rate of interest might have been high, so refinancing may be a great option for reducing your monthly payments by offsetting the old mortgage and procuring a new mortgage that comes with a lower interest rate. This can save you a lot of money over time. On the other hand, if your credit rating has improved considerably since you procured the mortgage, you can refinance to reduce the interest rate you are currently paying. If you can get a better mortgage rate than you're currently paying, mortgage refinancing may be a great option.
ii) You Need a Large Amount of Money Urgently
Refinancing can be done when the homeowner needs a large amount of money to either buy a second home, acquire a new car, bail someone out of jail or pay college tuition for a child. However, you must have a lot of equity in the property either as a result of making monthly payments over a number of years or due to an increase in the value of your property. For instance, if your original mortgage was $500,000 but you've paid off $200,000 and the value of your property has increased to $800,000, you can take home as much as $500,000 minus interest payments and closing costs. You can use the money to acquire rental property to increase your monthly income or spend it however you wish. It is important to note, however, that the term of the loan will be reset as agreed with the mortgage refinancier.
iii) You Want to Get Rid of an Adjustable Rate Mortgage
Fixed rate mortgages are usually more convenient to service than adjustable rate mortgages, which usually come with fluctuating monthly payments and interest rates. If you are tired of servicing an ARM, you can refinance to replace it with a fixed rate mortgage. However, timing is important since you do not want to get an expensive fixed rate mortgage. For this reason, you should wait for market rates to go down before applying for mortgage refinancing. Recommended website for more details.
iv) You Want to Lower Your Monthly Payments
Financial situations normally change with time. For instance, the salary you thought was high may become insufficient once you buy a new car, get married and have kids. With time, you may find yourself in financial trouble if you do not get a promotion at work as well as a substantial pay rise. If you find yourself in financial difficulty, you should consider refinancing your mortgage. For instance, if you're halfway through your 30-year mortgage, you can refinance to have the term extended by 5 years to spread the outstanding balance over a 20-year period, thereby reducing the value of each installment.