Why should you go for home refinance?

Author: Peter Gomes

Home RefinancingIf you are finding it difficult to manage your monthly mortgage payments, you can go for home refinance. When you refinance, you obtain a new loan secured against your home to replace your current mortgage.

Before you obtain this new loan, you must gather knowledge about the various advantages of refinancing and also decide which type of mortgage loan will best suit your needs.

How can you benefit by refinancing your home loan?

If you have an adjustable-rate loan, you can consider refinancing into a fixed-rate loan and make a fixed payment each month.

Some of the other benefits of home refinance are:

  • Lower monthly payment: You can lower your monthly mortgage payments by obtaining a new home loan offering a lower rate of interest than the current one.
  • Pay off mortgage faster: By refinancing into a loan with a shorter term, you can pay off your mortgage faster.
  • Repay other debts: You can also apply for a new loan that is greater than your current home loan balance and use it to pay off the current loan and also other debts.
  • Get rid of PMI: If your lender does not cancel your PMI (private mortgage insurance) when you have built up 20% equity in your home, you can refinance to eliminate it.

You can also consider refinancing if you have more than one mortgage. You can combine your mortgages into one new home loan.

How can you refinance your home loan?

When you consider home refinance, you must check your credit score and take steps to increase it. Lenders will offer you a loan at a low rate of interest if you have a good score.

You must shop around and compare the interest rates offered by the various lenders. You should also check the closing cost and other fees associated with refinancing.

Once you find out the total cost of your new loan, you must compare it with your existing mortgage and calculate how much time it will take to break even. In this way, you can find a home loan that will benefit you the most.

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