Discover When to Refinance Your Mortgage
Refinancing a mortgage means paying off an existing mortgage loan, and replacing it with a new one. Reliable experts for mortgage refinancing tell there are many reasons why homeowners refinance their mortgage loans. The reasons include opportunity to obtain a lower interest rate, the desire to convert from an adjustable rate mortgage to a fixed rate mortgage among other reasons.
Some of these motivations come along with benefits and pitfalls. Therefore, it is advisable for a homeowner to determine whether his or her reason for refinancing can offer true benefits. Read on to discover when you should refinance your mortgage loan.
Securing a lower interest rate
One of the reasons why some homeowners refinance their mortgage is to lower the interest rate on their existing loan. Certified experts for mortgage refinancing suggest that historically, the rule of thumb was that, it was worth the money to refinance if you could reduce your interest rate by at least 2%. However, today many lenders recommend that 1% saving is enough of incentive to refinance.
In addition, reducing your interest rate cannot only help you save money, but can also help you build equity in your home, and decrease the size of your monthly payments. It is therefore advisable to involve reliable experts for mortgage refinancing to explain to you in details how mortgage refinancing works and help you know the right time to refinance your mortgage.
Shortening the loan term
In many cases, when interest rates fall, homeowners get the opportunity to refinance their existing loan for another loan that has a shorter term without much change in monthly payment. Therefore, experts for mortgage refinancing advise that, for you to shorten your loan term successfully, you should seek relevant help with mortgage refinancing experts to guide you on areas that can add benefits on your side.
Tapping equity and consolidating debts
While the above-mentioned reasons for refinancing are all financially sound, mortgage refinancing can be a slippery slope to never-ending debt. It is important to note this in mind when you consider refinancing for tapping into the home equity, or consolidating debt. In addition, many homeowners often access equity in their home to cover big expenses.
Such expenses may include child’s college education and the cost of home remodeling, among others. Such homeowners may justify such refinancing by pointing out how the expenses covered are of advantage on their side.
On the other hand, many homeowners also refinance to consolidate their debt. At face value, it is important to replace a high interest debt with a low interest mortgage. Unluckily, refinancing does not come with automatic dose of financial prudence. In reality, many people who once generated high interest debt on their cars, credit cards and other purchases can do it again after the mortgage refinancing gives them available credit to do so. This can create instant loss, which can lead to perpetuation of debt cycle and eventually bankruptcy.
Finally, mortgage refinancing can be a great financial move because it can shorten the term of your loan, reduce your mortgage payment, and help you build equity more quickly.
You can get more information on mortgage refinancing at http://www.debthelpline.com.au/mortgage-refinancing/