Refinance Mortgage-Is it Right for You?
There can be a number of benefits for homeowners in refinancing a mortgage. A mortgage refinance basically involves obtaining a new loan in order to pay off an existing mortgage. Through terms that are more favorable under the new loan homeowners can take advantage of benefits such as paying off more of the principle with less money paid toward interest each month, lower monthly payments and tapping into existing equity.
Is a Mortgage Refinance a Good Idea Right Now ?
If you are considering a refinancing mortgage it is a good idea to understand when this may be advantageous for you. The following factors may make refinancing your mortgage a good idea:
- Lower interest rates
- Improved credit scores
- Utilizing existing equity in the home
If you now have a credit score that is higher than when you originally obtained your loan it can definitely be worth looking into refinancing your mortgage. This is because the most favorable loan terms are typically reserved by lenders for those individuals with high credit scores. Lenders commonly view those individuals with higher credit scores to be less of a risk and as a result are willing to reward them with better interest rates.
It is also a good idea to consider refinancing your mortgage when interest rates drop. Lower interest rates can result in a tremendous cost savings over the duration of your loan. Be sure; however, that the new interest rate will be low enough to compensate for any closing costs associated with the new loan. You can determine if refinancing is financially beneficial for you by taking advantage of our mortgage refinance calculators. Be sure the total savings that results from the refinanced mortgage will exceed the closing costs and any other fees that are associated with obtaining the loan.
Finally, it can be a good idea to consider refinancing your mortgage if you want to take advantage of the opportunity to tap into the existing equity in your home. Options such as cash out may allow you to utilize that equity for any purpose you may wish, including education, starting your own business and home improvements. One option is to utilize a home equity line of credit. This option allows funds to be made available to you but will not be disbursed until you request them. You will typically be able to draw upon these funds during a borrow period.