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Our Blog

23
Jul

Why Do People Hunt For A Mortgage Refinance?

If you are paying a mortgage, it can pay off to consider your options at different stages. There is no reason why you should not consider the option of mortgage refinance. There are several reasons why you should consider refinancing your mortgage and the most obvious one is to benefit from a lower rate. Lenders are currently offering lower rates than in the past and you do not have to continue paying high rates when there are better options. There are several good reasons for refinancing a home loan.

1.    Benefit from a lower rate

A lower interest rate is the most common reason why homeowners choose to refinance. However, even with this option there are people who cannot refinance because the falling home values have left them with little or no equity. If, on the other hand, you are in a position to refinance, you should not hesitate to do so. Keeping up with the interest rate information will help you to know whether it is a good time to refinance. If you are unsure about your position, talk to a mortgage broker about your options.

2.    Consolidating your debt

Another reason to refinance is as a way to cash out if you are trying to consolidate your debt. This was more popular in the past when housing prices were going up by more than 10% each year. Before the housing bust, borrowers refinanced to get cash that they could spend or invest elsewhere. Today, refinancing for a cash-out is not very common unless it is absolutely necessary. Those who choose "cash-out-refis" are often looking for cash to pay credit cards or lower their debt service as a way to save.

3.    Convert your adjustable rate mortgage

If you currently have an adjustable rate mortgage and you want to convert it to a fixed rate loan, refinancing is a good avenue. Converting your ARM will help you to benefit from the stability of a fixed loan. The thought of inflation and its effects has caused many people to look for options that will protect them from the effects of an adjustable loan. To most people, getting a stable rate is more attractive than getting a better rate. Some borrowers want to move from a hybrid ARM to a different one.

4.    Investing in a new property

If you are planning to buy a new property, a cash out can come in handy. Refinancing as a way to invest in new property is becoming more common. Before you decide to refinance to buy property, you should understand the tax and mortgage-underwriting implications. When making this decision, think about how you intend to use the new property and the refinanced house. Think about the property that you intend to use as your primary residence and if you intend to rent the other property. Talking to a financial or tax expert can help you to make the best decision.

5.    Consolidating two mortgages

You can choose to refinance as a way to combine your first mortgage with your home-equity line of credit. Refinancing to get rid of the credit is something that most people do to avoid future jumps in interest. Your home-equity line of credit may be as low as 3%, but the fact is that five years from now it may be as high as 12%. Getting rid of the loan will protect you from any eventualities in the future.

6.    Changing family dynamics

Refinancing can be a good way to address family issues such as divorce. Changing family dynamics can lead to refinancing in order to remove one spouse from the loan arrangement. This is usually about timing rather than rates and it is not always the best financial decision at the time. Before making a decision based on raw emotion, it is important to talk to a financial expert so that you can avoid losing money on a hasty cash-out refi.

 

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