Before deciding to refinance a mortgage, every homeowner should think about the pros and cons. Since interest rates are going down, many people think that now is a good time to refinance. Many people think this is a good idea. But refinancing might not be the best choice for everyone. When homeowners refinance, they should have a goal in mind. Here are the top three reasons why homeowners choose to refinance their mortgage.
Refinancing is a great way to make more money.
When you refinance an existing mortgage, the main goal is to save money and get extra cash. Most homeowners can get a lower interest rate when they refinance. So, their mortgage payments will go down each month. For a new mortgage rate to save you money each month, it should be at least two points lower than the old one. In some cases, homeowners may save a few hundred dollars a month.
Also, refinancing is a great way to cash in on the value of your home. Most of the time, homeowners would have to sell their homes to get the money they have built up in equity. But with a cash-out refinancing, you can use the equity in your home while staying in it.
With a Cash-Out Refinancing, you can pay off your debts.
If they choose the cash-out refinance option, homeowners have a great chance to get out of debt. It is simple to rack up a lot of credit card debt. But getting rid of debts is not as easy. When a home owner gets a cash-out refinance, they get a lump sum of money at the closing. Smart homeowners make good use of the money. This could mean making plans for retirement, paying off debts, or making needed repairs to the house.
Change your mortgage to one with a fixed rate.
Before interest rates went down, many people chose an adjustable rate mortgage because the rates were low at first. But the rates on adjustable-rate mortgages are hard to predict and can go up or down without warning. Because of this, your mortgage is free to change.
