We’ve all heard about refinancing, but only a few are aware of its benefits. If you’ve never come across this word before, let me briefly throw some light on it (without sounding like a dictionary or Wikipedia). Mortgage refinancing is simply a strategy of paying off a mortgage with a new loan (pretty much repeating the original loan process) but on more recent and favourable terms.
If you’ve maxed out your current bank loan limit and are looking for a better alternative to lower your mortgage payments or pay off your mortgage faster, refinancing may be the answer. In addition to helping you solve your financial problems, it has many other perks that not only help you achieve your goals but also make your life much more comfortable. But how? Buckle up for some of the best benefits of this intriguing strategy!
Much Better Mortgage Rate
Rates are significantly low, making it the number one reason that many people choose to refinance. If mortgage rates have gone down by the time you’ve taken out the loan, it’ s often possible to save money by refinancing your mortgage into a new home loan at current rates.
Save Some Bucks
Did you know refinancing saves homeowners an average of $4,264/year? A lower rate is synonymous to lower payments, meaning you’ll generally pay less for your home, especially if your refinanced mortgage matches the same payment date as your old mortgage. You can also minimize your month-to-month payments by extending the repayment date beyond what it is now. By paying less each month for your mortgage, you also free up extra cash in your budget that you can put into your savings accounts!
Bid Farewell to All Your Debts
It’s indeed a sad reality! Most of us struggle with daily or monthly payments because of our loans or leasing and want to consolidate our respective debts as quickly as possible. Thanks to cash-out refinancing, you can use the funds to pay off all your debts, be it a student or your car loan. Alternatively, you may also use the extra funds to finance renovations, wedding expenses, emergencies or perhaps simply enjoy a well-deserved family vacation!
Stabilize Your Loan Payouts
For those of you who currently have a variable rate mortgage and want more predictable monthly payments, consider refinancing your loan with a fixed-rate mortgage. Depending on the level of risk you are willing to take and your current and future financial situation, switching from a variable rate mortgage to a fixed-rate mortgage may be the ideal solution for you. This way, you don’t have to worry about seeing your monthly payments increase even when rates start to rise. Most people choose to switch from the first to the second, especially when interest rates are rising.
Own Your Home Sooner
There is no better feeling than owning a house much faster! From credit cards, loans, car payments and all the other financial obligations you may encounter, having one less monthly payment to deal makes you feel much more in control of your finances. Refinancing can be a great bonus if you want to pay off your mortgage debt at a faster time. If you have a 30-year loan, refinancing over 15 years will allow you to own your home much sooner. Moreover, if you proceed this way, you’ll have the opportunity to increase your home equity in a jiffy!
Your Plan B for Unforeseen Events
Refinancing can be of a helping hand in dealing with unexpected and uncontrolled situations. No one wants to dwell on tragedies involving severe injury or even death. However, knowing the options available to you in an emergency can ease your mind.
Scale Up Your Business
Regardless of whether you’re consolidating debt or have chosen to switch to a fixed loan, lower interest rates could translate into increased cash flow. That money could serve as a source of reinvestment in your business and help it prosper. You must be aware of specific elements when deciding to refinance, such as hidden costs or high penalties for late payments. Do your homework in advance and make the right decision for the financial future of your business.
Taking A Person Out of a Mortgage
Sometimes, usually after a divorce, a person who initially took out a mortgage is no longer held financially responsible for the loan. The only way to get him or her out of the pledge is to refinance it. Refinancing could also help delist a co-signer whose support is no longer deemed and who would like to be freed from his or her responsibility.
If you haven’t had a home and mortgage for a while, this may be an excellent time to at least consider refinancing your house loan. Explore your options to make the best decision for you, your finances and your home.
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