Good Reasons To Refinance Your Mortgage
There comes a time in your life that you know you will eventually refinance your mortgage
. However, you might also want to make sure that you are doing so for good reasons and not simply to help pay off your other debts. Consumers commonly categorize their home as their assets but, not many are aware that over time you may have built enough equity on your home that you may actually benefit from the value of your home. If you play your cards right and plan your refinancing ahead you might even be able to save yourself some extra cash.
One good reason for you to consider refinancing your mortgage, is the lower monthly payments that will be available for you once you finalize your home refinance. Generally this is due to the lower interest rate that allows you to cut down your monthly payments. Of course, in order to qualify for a significantly lower interest rate and the best refinancing deals, you may need to make sure that you maintain a good credit score and it might be even better if your credit scores have shown significant improvement than when you first started with your home mortgage. You may be able to maintain or improve your credit score if you continuously and diligently make your monthly
mortgage payment in time and without fail.
If by refinancing your home loan, you are able to reduce the monthly payments that you have to make, you may also simultaneously be increasing your financial stability. This is especially true, if you are currently on an adjustable rate mortgage (ARM) and you are refinancing your ARM to a fixed rate mortgage with an interest rate that is substantially lower than your ARM rate. The rule of the thumb is to make sure that you are able to reduce your interest rate by a minimum of 0.5%. By refinancing to a fixed rate, you may not have to worry about unpredictable interest rates anymore and you may be able to better budget your monthly expenses.
You may also want to consider refinancing your home loan, if you have plans to renovate or remodel your home to increase its value. Over time, you may have built enough equity on your home that you may be able to convert that equity into cash that you can use to fund the remodeling of your home. It is, in a way, an investment that may come in handy later on if, you decide to sell your home. You may also be adding to the home equity as well. Perhaps, you might also want to consider remodeling part of your home to rent it out. For example, you may remodel your game room into a spare bedroom that can be rented out. By doing so you may be able to offset your monthly mortgage costs.
Refinancing your home loan may also give you the option of consolidating your other debts. Based on the value of your home, you may apply for a larger loan, not only to pay off your existing mortgage but, also to pay for your other debts. For instance, you might want to finish paying off your student loan in one shot by putting a second mortgage on your home. Experts might advise that you do not do this to consolidate unsecured debts such as credit card balances because, if you fail to make due payments, you might run the risk of losing your home to your creditor. So, if you do decide to refinance your home loan to pay off your credit card debts, it is advisable that you make sure you are financially able to make your mortgage payments consistently and diligently.
Before deciding to refinance your home loan, it may be wise for you to really evaluate your reasons for doing so. If you are sure that you are refinancing for a solid financial reason that will benefit you more than it will harm you, you may go ahead and conduct your own research on several
mortgage companies that may be able to help you achieve your goal and give you the best deal.
by: Ask Bill
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