What Is Refinancing A Home?
Thinking about refinancing your home mortgage? For many people, refinancing makes sense. It’s a great way to help you get closer to goals, whatever those happen to be. To help explain that a bit more, let’s talk about what refinancing is, why people refinance, and your next steps.
When you refinance your home, you essentially pay off your old for a new one. There are two reason why you would do this:
- To decrease your payment or change the terms of your loan,
- To pull cash out of your equity.
Keep in mind, this means you must re-qualify for a new home loan when refinancing.
Should I Refinance My Home?
Here are a few reasons why some people choose to refinance their home.
Debt Management – Someone with a higher interest rate on their debt may pay off higher interest rate liabilities with their mortgage.
Remove Mortgage Insurance – If your loan has mortgage insurance you may be able to remove said mortgage insurance once property reaches sufficient equity.
Pay Off Your Loan Faster– Some people decide they want to pay off their home more quickly. You can refinance and drop the terms of your loan, for example going from a 30-year loan to just 20 years. This may increase your monthly payment, but save you thousands of dollars in the long term.
Adjusting Terms of your loan – Adjusting Terms of your loan: depending on current terms you may adjust from Variable Rate to Fixed Rate terms (or vice versa) through refinancing.
Lower your Monthly Payment – There are multiple ways you can possibly drop your monthly payment after taking out initial financing. For example, qualifying for a lower interest rate by your equity increasing in your home, FICO score improving, etc. or market improvements.
How Do You Refinance Your Home?
Once the lender approves and gives you the loan, your old mortgage is paid off and you begin paying down the new one. If you had chosen to withdraw any cash based on your home equity, that cash gets sent to you.
Are You Ready To Refinance Your Home?
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