Life happens, interest rates change and situations arise which may cause a borrower to find that they might want to refinance their mortgage.
While the subjective reasoning behind refinancing will be as unique as each borrower, we have provided a few example situations that could potentially influence the decision.
The purpose of refinancing is to allow a borrower to obtain a more beneficial interest term and rate. It can also be to avoid balloon payments or to cash out a portion of a home's equity. A better interest rate may look tantalizing, but it is in the borrower's best interest to consider that there are fees involved in refinancing and that interest rate may not end up showing bona fide savings until much later.
The well-informed borrower considers many factors. For example, how long they've had the loan and where they are on repayment. How long they intend to remain at that home. Selling a home shortly after they refinance may keep the borrower from seeing the positive effects of refinancing.
It is important to remember that sometimes the cost of refinancing can offset savings under new loan terms. Pay attention to such things as loan origination fees and mortgage insurance. Some aspects of refinancing may be disadvantageous and your refinancing benefits depend on your individual financial goals.
The informational content referenced below goes just a few of the options that may be available to borrowers.
Why Refinance - It is not just that one attractive interest rate number spouted by the fast-talking advertisement that affects the final monthly bill. Could it be reducing your interest rate? Obtaining money for larger purchases or to reduce credit card debt?
It’s about timing! - Just like learning how to juggle, or dance the tango, refinancing a mortgage may turn out to be all in the timing.
What’s my LTV? - The homeowner’s Loan-to-Value (LTV) percentage is simple to understand the equation that gives a general indication of how much you owe on your mortgage compared to your home’s current market value.
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