What exactly is a refinance? Simply put, a refinance (or REFI for short) is a loan that has been financed again. There are dozens of beneficial opportunities that are presented to homebuyers that choose to refinance. In most cases a refinance allows for the borrower to obtain a new loan with a lower interest rate and lower monthly payments. It’s important for current homeowners to know that a refinance could mean saving some money every month and as a result, having more money in your pocket as well. As a proud representative of Valley West Mortgage, a company that specializes in refinancing, I’d like to share with you 8 reasons why you should refinance your home loan. Do we all need another reason to refinance?
Reason To Refinance: Cash Money
A Cash out refinance is the kind of refinance that will allow the borrower to receive some money for the equity (or the value) of their home. This kind of refinance will allow you to obtain a higher loan amount than what you already owe, and in turn you will get difference for the two loans in cash. For example, if the total cost of your home is $400,000 and you’ve already paid $100,000 on the loan, then you’ve still got $300,000 to pay off. If by chance you need $50,000 to pay off a debt, put a down payment on a new car, invest in a stock, or embark on some other business venture, you could refinance your current home loan to $350,000. This will include your former balance of $300,000 plus the $50,000 that you wanted. The difference of $50,000 will be given to you in cash.
Reason To Refinance: Lower Interest Rates
If you bought your house at a time when interest rates were high, a refinance could give you the chance to get a lower mortgage rate. This kind of refinance (in most but not all cases) will make your monthly payments lower, meaning you could pocket the money you would have been spending on your mortgage payment.
Reason To Refinance: Save For Something Special
If your daughter’s Sweet 16 is coming up or you want to take family vacation next year, you could refinance for lower mortgage payments, save the extra money and put it towards something you really want.
Reason To Refinance: Change In Household
If you have a spouse who has passed away or maybe an ex-spouse who no longer lives with you, you could refinance the loan into just your name. Or maybe your parents bought you your first home and now that you’ve got a family of your own you want to refinance the payments into your name instead of your parents’ names.
Reason To Refinance: Get Out Of An Adjustable Rate Mortgage (ARM)
An Adjustable Rate Mortgage is a type of loan that allows for your interest rate to go up or down. When rates are low an ARM could be phenomenal for your finances, but when rates rise and Arm can be financially draining. A refinance will give you the opportunity to change your mortgage to a fixed rate mortgage, meaning your payments will not fluctuate with rates.
Reason To Refinance: Change Your Bank
If you originally took out your mortgage loan will a small state bank or credit union and you are moving to a state where this bank doesn’t do business, you could refinance your home loan with a new bank that is closer to you.
Reason To Refinance: Shorten The Life Of Your Loan
Although refinancing to a higher mortgage payment won’t save you money right away, it could save you money in the long run. If you refinance and change your loan term from a 30 year fixed mortgage to a 15 year, the amount of interest you would have paid at the end of your 15 year loan will be significantly less than what you would have paid had the life of your loan been longer.
Reason To Refinance: Credit Card Debt
Thousands of Americans are spoiled by the luxury of credit cards. We can spend now and pay later. The problem occurs when we get a little too credit happy and we lose control. Drowning in credit card debt is not a way to live your life. The constant letters and phone calls from bill collectors can be agonizing. Refinancing on your home loan can provide you with a way to pay on credit card debt.