Refinancing is the process of applying for a new mortgage that will replace your original mortgage. When you refinance, you are actually paying off your old home loan with your new one. The process of refinancing can be advantageous for several reasons, and many homeowners choose to refinance in order to obtain a better interest term and rate on their mortgage. Here is a look at some of the top reasons that refinancing your home might be a good move for you as a homeowner.
Take advantage of lower mortgage rates.
Mortgage interest rates are constantly in fluctuation, so if you happened to obtain your home loan at a time when interest rates were particularly high, refinancing could be a good move for you. Since average national mortgage rates are hitting historic lows, refinancing these days can allow you to obtain a new mortgage at appealingly low rates. Ultimately this means that you can enjoy a lower home loan payment each and every month.
Stabilize your monthly payment.
You can also use refinancing to convert a variable home loan rate (adjustable-rate mortgage, or ARM) to a fixed one. Many homeowners opt for this because they like the stability of a fixed home loan rate.
Renegotiate your loan terms.
A rate-and-term refinance will allow you to renegotiate your loan terms, ultimately allowing you to change the face of your monthly payment completely. In addition to getting a new interest rate or a fixed rate, this could mean going with another lender, putting more down on your home, eliminating the need for mortgage insurance, and shortening the overall home loan term.
Get cash back.
For those who have significant equity in their home, or who have paid off their home completely, getting a cash-back refinance can be a way to get the funds you need to purchase big-ticket items, such as a car or second home. Some people might also opt for a cash-back refinance in order to pay off credit card debt or other high interest debt.
Of course, not all homeowners will quality for a refinance. Lenders will need to assess your credit score, payment history, income, employment history, assets, and current home equity to determine whether or not you qualify. Refinancing is best for homeowners who have a strong credit history. To determine whether refinancing your home will be advantageous for you, contact a Citywide professional at one of our many branches around the country.