There are any number of reasons to refinance your existing mortgage or mortgages. Start by considering what you hope to get out of a refinance and whether a refinance will save you in the long run.
If the list of reasons to refinance is longer than the list of reasons not to, or if your cost savings will be significant, then it’s a good time to consider refinancing.
What are some of the reasons to refinance your current mortgage?
* First, if it gains you a better interest rate and/or it changes the term of the mortgage, then a refinance makes good sense. No refinancing plan will ever pay off your debt; rather it modifies the current loan. Lowering the interest rate is one of the top reasons people refinance. Now that banks are more willing to lend to people again, even those who owe more than their home is worth are more likely to be eligible.
* Debt consolidation is a second reason. Some people have a lot of credit card debt that runs them hundreds of dollars a month in minimum payments. It makes good financial sense for some to refinance their mortgage and lower the overall amount they pay each month. Also, if you have a home equity loan or line of credit as well as a mortgage, it sometimes makes good sense to put the two together. This will lower the payments each month.
* Third, many people got into loans with attractive entry level rates that then ballooned when the adjustable rate portion kicked in. Being able to lock in their interest rate at a consistent rate for the remainder of the loan period is very appealing and should be strongly considered.
* Another major reason is because people need some extra cash. Though it might not necessarily be a refinance, a restructuring of an existing loan can mean a substantial check sent to the homeowner. This can be used to start a business, care for an aging parent, buy investments, or do home repairs.
* Sadly, sometimes a divorce can mean a need to refinance, if for no other reason than to remove the other spouse’s name from the title. It sometimes helps the person who will be staying in the house by giving him or her a lower monthly payment, since now there is only one income paying the bills.
Some factors to consider when refinancing include the costs of the fees and any title paperwork filings. These can sometimes eat up any savings that might otherwise be realized.
Also consider that the house will still always be the item the bank holds as collateral. This can be especially important if the refinance is being done as a way to get additional funding for something else and not just saving money each month.
For many, though, refinancing can be a good answer to a tough financial situation.