Refinancing can save homeowners money when market interest rates drop lower than their present rate. Refinancing can be used to reduce the interest rate, change the term of the loan, change the mortgage type or to consolidate debt.
Homeowners refinance their mortgages for several reasons:
Attractive Interest Rates: It can make sense to obtain a new mortgage to pay off your existing mortgage if interest rates have gone down since you got your original mortgage.
Switching Mortgage Type: Some homeowners refinance in order to switch the type of mortgage they have – from variable to fixed interest rate, or vice-versa. Balloon mortgages must either be paid in full or refinanced at the end of their 5 or 7 year term.
Shortening Mortgage Term: Some homeowners pay off their original mortgage in order to take out a loan with a shorter term – thus paying less interest because the money is borrowed for a shorter period of time.
"Cashing Out": Certain lenders will let you borrow more money than the balance on your original mortgage based on the equity you have in your home, making additional cash available for other activities, or to pay off other loans.
Refinancing can be a good way to reduce your monthly mortgage payments or shorten the term of your loan. Buttaking out a new loan may involve costs. You may have to pay discount points, appraisal fees, and closing costs up front. Investigate all the fees associated with a new loan before you go to closing so that you make an informed decision as to whether you will save money by refinancing. Credits: www.buyersfund.com
