Refinancing Your Home Loans
Refinancing is one of the most popular practices in recent years. There are a lot of reasons why an individual would choose to refinance. If you are down that road, it is best for you to read on this article about how you can refinance your home loans and make the most out of it.
What does it mean to refinance your home loan? What are the benefits of refinancing your loan? What are the risks that you must take with refinancing? In this article, we answer all of these questions.
What does it mean to refinance your home loan?
Refinancing is a process where the borrower replaces an existing mortgage with a new loan. People refinance their mortgage for a lot of different reasons.
The process, however, is a tedious one. The individual would need take time doing his research on what kind of refinancing works for him. The borrower also needs to collect the right documents. There is also a processing window after the individual submits a refinancing application.
What are the benefits of refinancing your loan?
Refinancing is done by individuals for a lot of reasons. The following are the benefits of refinancing that an individual would appreciate:
- Refinancing helps lower monthly payments. A study shows that a borrower who refinanced may save more or less $160 per month. The lower monthly payments allow for cash flow to be redirected somewhere else like more budget for groceries or more money to save in the bank for a rainy day.
- Refinancing allows the homeowner to get rid of paying off the premiums of mortgage insurance. With refinancing, two things happens, with the property appreciation, cash flow increases, or the principal debt is paid off. This means that there is no longer a need for mortgage insurance and the homeowner can get rid of that.
- Refinancing allows the lender to move from an adjustable rate mortgage to a fixed rate loan. The problem with adjustable rates is that they can go as high as they can and the borrower does not have a clue when it will do so. With refinancing, the borrower can get away from that payment scheme and move to a fixed rate loan.
- Refinancing allows you to take out cash on your home value once it appreciates. The money can be used for whatever the individual pleases and what matter is that he has the option to actually do so.
What are the risks that you must take with refinancing?
Anything good would come with risks and the following are the risks associated with refinancing:
- The whole mortgage process starts again once you decide to take out equity on your home and refinance. One of the main things that you may need to face with refinancing is having to restart your mortgage once again. This part means that you would need to restart the process again, pay monthly fixed payments, and cover interests. Basically, you do not get rid of debt by refinancing your home loan.
- You pay for your mortgage for an extended period. Refinancing is like extending a loan and not getting rid of it. Hence, if your original loan is 30 years and you refinance in your 20th year for another 15 years, you are extending the life of your loan to 35 years. For some, this may be a good idea especially if the need is there.
Go for It!
In the end, if you really need the money, you should go for refinancing. For all of the questions that you may have, getting help from a mortgage professional should help you. Contact a mortgage professional today and get the help that you would need.
This is should be a prospective customer's number one call to action, e.g., requesting a quote or perusing your product catalog.