21 Aug Why You Should Refinance Your Mortgage
In hard economic times, you may be looking for ways to cut costs, but saving money is not the only reason why you should refinance your mortgage. You can use cash freed up to build a retirement account, do a remodeling project or send your child to college. You can take advantage of built up equity to buy a boat or car, or to take that vacation you have been wishing for.
One of the reasons for a refinance is to gain a sizable amount of cash from the equity that has been built up over the months or years. The cash that is available can be used for any number of large projects or purchases. For example, you may want to send a child to college or renovate the home itself to make it more functional or attractive. You may want to purchase a vehicle or a boat. In effect, you are giving yourself a loan.
If you are trying to cut monthly costs related to housing, refinancing the principal amount is a good way to do so. There are two ways in which the monthly payment can be reduced. A refinance can spread the remaining principal balance over a longer period. If you are able to negotiate a significantly lower interest rate, the monthly payments will also be reduced. You could keep the payoff amount the same as the existing loan and pay less every month.
Locking in a lower interest rate is an advantage in itself. Interest rates may be significantly lower than when the original loan was acquired. You might be able to get a better rate because of an improved credit history. The switch from a variable rate to a fixed rate may be a wise financial move for you. Stability in the payment amount will benefit in budgeting and planning.
Consolidating high interest rate loans into a lower rate home equity loan is an excellent reason for a refinance choice. Credit card interest rates tend to be much higher than mortgage interest rates. By rolling these high rate loans into a home loan, you could save thousands in interest payments over the loan period.
The reasons why you should refinance your mortgage are varied. The main feature may be that you have access to lump sum amounts or to more working capital each month. When you are proactive in managing your finances, you are able to enjoy the possessions that you have readily.