Five Reasons for Refinancing Other Then Lowering Your Payment
Posted on July 2nd, 2011
There is more to a refinance then just lowering your monthly payment. Although lowering your interest rate is a great motive, there are also five other reasons to consider a refinance.
If you decrease the term of your mortgage in a refinance by going from a 30-year to a 15-year, you’ll pay a lower interest rate and shorten your total interest costs. You’ll build home equity more quickly, and pay off your loan sooner, even though your monthly payments go up.
ARMs offer low introductory rates, but they also offer long periods of uncertainty that make it hard to budget. It makes sense in a mortgage refinance to go from an ARM to a fixed-rate loan during a low-interest rate environment. You’ll get emotional security and your rate won’t fluctute with changing economic conditions.
With a cash-out mortgage refinance, you can turn an intangible asset—accumulated home equity—into a tangible one—cash. It makes sense to do so if taking cash out to purchase other properties or for funding a child’s college education. However, don’t do it for frivolous reasons. Unless you’re extremely disciplined, you could find yourself in even deeper debt. When interest rates are low, a mortgage refinance lets you consolidate your main mortgage and an outstanding home equity loan to realize a lower overall monthly payment. Plus, you’ll have only one mortgage payment to make each month.If your home is jointly owned with your soon-to-be ex-spouse, a mortgage refinance will turn a joint obligation into the responsibility of the person keeping the home. Nothing is harder then tracking down a former spouse who doesn’t hold up his or her end of the mortgage. A mortgage refinance for the right reasons can save you lots of money—and that’s the best reason of all. If one of these reasons effects you, please feel free to contact me anytime.
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