Many of you may not know this but mortgage refinancing can provide a number of benefits. And while the specific benefits that result will depend on what the borrower is looking to achieve, it’s best to inform yourself on this topic so that you are made aware of all the options at your disposal. This is why we thought it would be useful to put together a brief article on this topic. If this is something that you want to learn more about, read on for five notable benefits of refinancing your mortgage that you have to know about.
Better Mortgage Rates
One of the most common reasons to refinance is when mortgage rates have fallen since you took out the loan. If you have refinanced your mortgage before, you can get a better rate or a lower payment by refinancing again. Perhaps your credit situation has improved since you took out your mortgage; refinancing may give you a better interest rate.
Lower Monthly Payments
If you refinance your mortgage, you can get a lower monthly payment and the same payoff date by getting a lower interest rate. You may also lower your monthly mortgage payment by extending the payoff date of your mortgage, so you’re paying less in principle each month.
Shortened Payment Terms
Many borrowers choose a 30-year, fixed-rate mortgage when they buy a home, then refinance to a 15-year, fixed-rate mortgage a few years later. This allows them to pay off the mortgage faster and save tens of thousands of dollars in interest payments. Mortgage rates on 15-year mortgages are also significantly lower than on 30-year mortgages, so you may be able to reduce your monthly payments without increasing your overall costs much.
Increased Funds
With a cash-out refinance, you borrow money against the equity you have in your home. In most cases, you receive a check for the amount of the loan at closing. The amount is added to the principal balance on your existing mortgage. Since mortgage rates tend to be lower than other types of debt, and this interest is tax-deductible, it can be a cost-effective way to borrow money.
Consolidates Debt
You can use a cash-out refinance to pay off other debts and save on interest payments. Since mortgage rates are usually lower than credit card interest rates, you save on interest. If you are paying high-interest credit card bills and have a home to borrow against, a cash-out refinance can help you get lower mortgage payments and pay off your credit card debt.
Mortgages and home equity loans are often repaid over the course of many years, which means that your monthly payments can be less than most other types of debt. Interest on a mortgage or home equity loan is also tax-deductible, up to certain limits, whereas interest on other debts usually is not.
Conclusion
We hope this article proves to be useful when it comes to furthering your understanding of mortgage refinancing. As you can see, refinancing your mortgage can be extremely beneficial when utilized in the right situation. Be sure to keep everything you learned here in mind so that you can make the most informed decisions to improve your short-term and long-term finances.
If you’re looking for a mortgage lender in Sacramento, you’ve come to the right place. Mortgages and loans can be tricky to navigate for many homeowners, but with the help of Hawkins Home Loans, this process becomes infinitely easier.
