Everyone has heard about refinancing, but only some realize they could benefit from it. There are various refinance options available to homeowners that can help them meet their various financial goals.
Reduce Monthly Payments: Rates are at historical lows, so you could benefit from refinancing. By refinancing to a lower rate, you could reduce your monthly payment. If your immediate goal is to save money, you may want to refinance to a longer term, thus increasing your cash flow by reducing monthly payments. Similarly, if you have an adjustable-rate-mortgage (ARM) and plan to live in your home years past your first adjustment, you could refinance and lock in to a fixed-rate loan. This will avoid higher interest rates and payments in the long term.
Get Cash Out: You can utilize your equity to receive some cash out for various expenses. This occurs when you refinance a mortgage greater than your current mortgage, and you receive the difference in cash. You even have the opportunity to roll a second mortgage in your first mortgage.
Restructure Debts: The other great benefit to a cash-out refinance is using the funds to pay off other debts. You might have a high-interest rate credit card, expensive student loans, or other debt with a higher rate than the one you're receiving in your refinance. Many people also use this cash to finance home renovations, additions, family vacations, wedding expenses, or a child's education.
Uncontrollable Events: The final benefit is for events out of your control. No one wants to think about a tragedy such as death or serious injury, but it is good to know you have options under your belt should an emergency occur. Refinancing to tap into your equity may extend your term or increase your principal, but it might help with a newer, more pressing issue.
Every situation and borrower is different. Do you have a reason to save money?