The 3 Core Reasons Why You Should Refinance Your Home in 2010
10/07/2010
You may have heard that refinancing your home can be a huge benefit to you. This is true. But why? There are three primary reasons to pursue a mortgage refinance. Depending on your personal situation, all or none of these reasons may apply to you.
1. You can take out cash. If your home value has increased or if you've paid off enough of your current mortgage, you have what's called "equity" in your home. This equity is nothing more or less than cash tied up in an investment. The investment is your home. If you want to access this cash and put it toward other expenses, a refinance allows you to convert some or all of this equity into spendable income. Your new mortgage amount will reflect this cash amount, but it may be worth it if you have expenses such as medical bills or college tuition that must be paid for.
2. You can lower the amount you pay each month. Your monthly mortgage payment amount is determined by the length of your loan term and the interest rate on the loan. If you weren't able to take advantage of the lowest mortgage rates when you took out your original loan, your monthly mortgage payment is likely higher than it has to be. A refinance at a lower mortgage rate will reduce your monthly payment. This is often an option for first time home buyers who didn't' qualify for the best rates when purchasing. It can also be hugely advantageous for families and individuals who need more income to make ends meet each month.
3. You can increase or decrease your loan term length. Perhaps your original loan had a fifteen year length, and you've decided to stay in the home for longer. You can refinance into a thirty year mortgage, which will save you money on your monthly payments. Or consider the opposite situation. You started with a thirty year mortgage but wish to save money over the course of your loan by paying it off sooner. You can refinance into a fifteen year loan. You may be able to get a different, better loan type if your credit score has improved. These options and more are available to you when you refinance.
