When trying to buy a home, many people will take any mortgage they can get. You will eventually start to wonder if you could get a better deal. You've just entered the world of refinancing.
Why you should refinance your house
In one important way, traditional mortgages are the same as any other kind of loan. You can pay them off early, but in the first few years of a mortgage loan, there are sometimes fees for doing so. People often take out a second loan to pay off loans early in the real estate world. This is called refinancing. Why would they do that? There are many reasons, but here are the ones that come up most often.
It can be stressful to buy a house. Between the home inspection and the end of the escrow period, buyers often feel like they have to get any financing they can. But as time goes by, they start to realise that they could have gotten a better mortgage deal. Even a small change in the interest rate, like a quarter point, can save you thousands of dollars over the life of the loan. With this in mind, they start to think about refinancing their original mortgage to lower the amount of interest they have to pay over the life of the loan.
In line with this idea, many homeowners also try to refinance in order to have more control over their cash flow. They don't try to reduce the total amount they have to pay back on a loan. Instead, they look for terms that will allow them to pay less each month. If you save $400 a month on payments, that's an extra $4,800 in your pocket every year, which can be nice if your monthly cash flow is a little tight.
On the other hand, many homeowners refinance in order to get cash out of their home. They have built up equity over time and want to turn that non-liquid asset into cash that can be used for something else. Most of the time, this is because they need money for an emergency, like a health problem, or to send their kids to college. The reasons are different, but the goal is always the same.
Refinancing a mortgage is much less stressful than getting a loan for the first time. You don't have to act right away, so you can look around for the best deal for you.
