Mortgage refinancing is pretty simple to explain. Basically, it’s taking out a second mortgage on your home. In some situation, refinancing can simply mean that you’re switching mortgage companies. Many go through the first example of mortgage refinancing because they wish to make a large purchase that they don’t have the money for. When people choose to switch mortgage companies, it’s usually because the other guy can offer them a lower interest rate.
The Mortgage Company You Have Now May Offer You A Lower Rate If You Refinance
As we get older, we tend to become more responsible. Established adults have steady incomes and are able to pay their bills when they’re due. This allows them to build up their credit score.
It’s possible you took out your mortgage on your home when you where pretty young. Either you didn’t have enough time to establish a decent credit score, or you where unable to establish it due to a lack of money to pay bills. This probably means you where stuck with a pretty high interest rate.
Now that you’re older and have proven yourself to be more responsible, the bank that lent you your mortgage will offer you an interest rate that’s much lower then the one you have now. This could save you hundreds, and maybe even thousands, of dollars a year.
Thinking Of Using Home Equity To Buy That Car You’ve Always Wanted?
Using home equity to take out a loan does not mean you’re going to have to pay two mortgages every month. Instead, the mortgage company will pay off the amount you have left on the original mortgage by using some of the money you’re borrowing. Since the money you’re borrowing will be partly used to do this, will actually be responsible for paying back more then the cost of your large purchase.
Something to Consider Before Refinancing
Almost every mortgage contract has a clause which states a penalty for refinancing. This penalty is often thousands of dollars. So if you’re refinancing to save yourself a few hundred dollars in interest rates every month, it may not be worth it. Be sure to take any penalty into consideration before deciding whether to do this. In some situation, the home owner is saving money despite the penalty.
It’s Always Wise To Talk With A Financial Adviser
To truly know you’re making the right decision, you should speak with your financial adviser. If you do not have one, you can easily find reviews for certified advisers on Angie’s list. The site is free to use now, so there’s no reason not to take advantage of it. Don’t let one bad review deter you. Some people are impossible to please.
Mortgage Refinancing Exists Because It Works For People
If mortgage refinancing is such a terrible option, it wouldn’t be the one taken by so many people. Do yourself a favor by seriously considering this potentially beneficial strategy. Other home owners have already done it. Is it time for you to jump on board?
