Homeowners are used to receiving solicitations for refinancing, but your best reason(s) for refinancing are your answers to "Why should I refinance my mortgage?" Here are a few situations that show how a refinance can be used as a financial tool that can help you shape up your entire financial picture.
Plain Vanilla Mortgage Refinance: Lower Your Mortgage Rate, Period
Lowering the interest rate is the most common reason for refinancing. Things to consider include your current mortgage balance, length of time you plan to own your property and the remaining loan term. If you're a few years away from paying off your mortgage or plan to sell soon, the cost of refinancing can eliminate the potential savings. You'll pay closing costs if you refinance remember to deduct closing costs from your savings estimates. Using our refinance calculators can help you estimate potential savings if you refinance.
Neck Deep in Debt? Refinancing Your Mortgage Can Help
Unemployment, underemployment, job relocation and underwater mortgages that keep homes from being sold or refinanced are a few things that contribute to homeowners' financial problems. If you're buried in credit card debt, a cash-out refinance can help simplify and reduce your payments. Bear in mind that debt consolidation doesn't pay off your debt. Instead, your balances are moved from several higher-interest accounts to your home mortgage balance. Ideally, you'll write one check per month to your mortgage company rather that struggling with multiple bills, varied payment due dates and high finance charges. While this may sound like a simple solution, there are potential drawbacks to refinancing your mortgage for debt consolidation.
The NOLO Law for All website recommends caution when consolidating unsecured debt with secured debt; In the case of refinancing, you could risk losing your home to foreclosure if you don't make payments on your refinance mortgage. Before refinancing a mortgage for debt consolidation, it's important to understand how you got into debt. If problem spending caused your debt to become unmanageable, debt consolidation can provide a false sense of security. If you consolidate your debt by refinancing your mortgage, you'll add to the amount owed against your home. If you resume old spending habits after you refinance, you could risk adding even more debt. When calculating potential savings, it's important to understand that while mortgage interest rates are typically lower than rates and fees associated with credit card debt, a mortgage is repaid over a longer time. A longer repayment term means that more interest will accrue and could reduce potential savings related to consolidating debt through refinancing your mortgage.
Refinancing Your Mortgage for Home Improvement, Renovation
You've had a lot of great years in your home, or maybe you've purchased a fixer-upper and want to do a complete renovation. Refinancing your home loan may provide the cash you need to pay for home improvement projects or major remodeling. Before shopping for refinancing, you'll want to shop estimates for the work you want to do. It's also worthwhile to determine the types of home improvements that add the most value to your home. CNBC reports that improvements anyone can appreciate, rather than those geared to specific lifestyle or hobbies, are likely to return the most on your investment. Contact local real estate pros to learn more about which improvements can add the most value to your home.
Should I Refinance My Mortgage? Find Your Best Answer
The best way to decide whether or not to refinance is to review your overall financial picture. Can you save money by refinancing? Add home value by investing in home improvements? Do you want to consolidate debt, and can you save money by doing so? These are a few things to consider before requesting refinance quotes. Our network of mortgage lenders can provide quick quotes and refinancing information. Our mortgage page is a good place to start. Still have questions? Discuss your financial needs with a financial pro to help you decide if refinancing is your best option.