Home Loan Refinance

Why Consider Mortgage Refinancing?

Refinancing a mortgage can be a wise choice in many situations. It can bring substantial savings over the term of the loan, or it can offer quick cash to cover a temporary financial shortfall. A homeowner's reasons for refinancing are almost as unique as their financial needs, and the advantages realized with a refi are dependent on goals, loan type and interest rate chosen. These are some of the reasons why you should consider refinancing your home mortgage.

• Lower interest rate.
  It can mean lower payments each month, and when you consider that mortgages can be written for terms of 15, 20, 30, or even forty years, even a single percentage point saved in interest can mean savings of thousands of dollars over the life of the loan. A refinance involves paying closing costs when the loan is signed, and be sure to review these costs in order to determine whether you'll be saving enough in interest to cover them.
• Loan term.
  While most mortgages used to have a standard term of thirty years, many homeowners today are opting for fifteen-year, twenty-year, or forty-year terms in order to accommodate their financial needs. Shortening your loan term will mean higher payments, which will decrease the overall cost of your loan. Shorter loan terms often come with correspondingly lower interest rates than longer-term loans, meaning even more savings.
• Changes in circumstances or income.
  If this is the case for you, switching to an interest-only or adjustable rate mortgage may make more sense. These loans offer lower payments for a fixed period of time, and they are a good choice if you think that you will be making more money in a few years. They are easier to get than fixed rate mortgages, making them a good option for those with less-than-stellar credit. If you already have an adjustable rate or interest-only mortgage that's about to come due, you might benefit by converting it to a fixed rate mortgage.
• Equity.
  While you've been making mortgage payments, your home has been building equity. Equity results when the total amount of the mortgage decreases, or when the home's value increases. Refinancing at this point is a good way to access the equity you've stored in your home. This is called a "cash out" refinance, and many homeowners take out these loans to pay for home improvements that further increase equity. Other borrowers use the money to pay off higher-interest debts, reducing monthly payments and improving their credit rating.

No matter why you are considering refinancing your home mortgage, you should carefully go over the pros and cons before you make a decision. Careful research now will mean less stress later.