Your mortgage will most likely be the biggest debt you have ever to deal with your in your life. It is also quite long-term with home loans stretching between fifteen to thirty years. Along the course of this investment, as a homeowner you need to find means to maximize your equity and lower your debt. Here refinancing comes into the picture.
Reasons to do home refinancing
- Get a better interest rate – This is among the top reasons why homeowners wants to refinance. You basically swap a higher interest rate for a lower interest rate loan. This makes you monthly mortgage lower compared to your old one.
- Different type of mortgage – If you opted for an ARM or adjustable rate mortgage when you started the loan, you can expect the monthly payments to go up after some time. You can refinance and go for a fixed-rate loan so you can lock the interest rate and not be subjected to market fluctuations.
- Home equity – If you have improved your finances through the years, you might be more comfortable paying your mortgage. You can refinance and get a loan with a shorter term. If you do not want to refinance, you can also make additional payment every month to build the value of your home faster.
- Taking out cash – You can also refinance your mortgage and tap into the value that you have in your home. You can practically use this extra funds for other purposes like a home improvement, paying off other debt, or for your vacation.
You have to consider a lot of things when thinking of refinancing. Make sure that you consider potential penalties, how long will you still be staying in your current home, taxes, monthly payments, and equity among others.