Reasons to Refinance

There are lots of home owners who see ads for refinancings loans but have never considered the option before. With a variety of refinancing loan options available and just as many reasons to refinance, if you haven’t explored your options or the motivations behind some of those options for many with existing mortgages, now’s a great time to learn what you might be able to do with a refinancing loan.

At the time of this writing, mortgage rates have fallen steadily (in small amounts each day, but those days do add up over time) and in addition to the usual reasons to explore a refinancing loan, when interest rates get into downward trends, that can be an added incentive to explore the options.

Reasons to refinance include getting into a lower interest rate--a move that saves the borrower money over the lifetime of the loan. The lower interest rate factor can’t be denied when the change is calculated over the long haul--savings are real, but definitely take some time to realize.

Another reason to refinance is to lower monthly mortgage rates. With some refinance loan products such as an FHA streamline refinance loan, the rules of the loan program includes a requirement that the borrower’s payments go down as a result of the loan, or the interest rate. Or both.

Some people are more interested in refinancing in order to get cash back after the original mortgage has been paid off. A Cash Out refinance loan can help eligible borrowers do just that, and that money back can be used for any purpose acceptable under the terms of the loan agreement or acceptable to the lender. Cash out refinancing loans are particularly effective when property values in the neighborhood have started to rise and the borrower has been growing equity in the home.

Some people refinance their home loans to get into a shorter loan term than the original mortgage. Depending on the lender and your circumstances, you may be able to refinance into a shorter loan term that would result in a quicker payoff. Some borrowers simply choose to pay more on their mortgage installments, but if you choose this route, be sure to investigate whether there’s a penalty for early payoff on your home loan.

Rate this item
(1 Vote)