Paying off loans doesn’t always go as planned.
Written by Northwest Mortgage
Published on Tue, Jul 13, 2021, Last Updated on Tue, Jul 13, 2021
Paying off loans doesn’t always go as planned. Circumstances change with time, and so do your finances, often making it difficult to pay off the debt you thought you could easily manage. Your financial situation can also improve with time, putting you in a better position to pay off your debt and/or qualify for better mortgage options. The market situation can also change for the better, lowering the interest rates.
If you’re in any such situation, consider refinancing your mortgage.
What is Mortgage Refinancing?
Mortgage refinancing is just what the name suggests – taking a new mortgage loan to pay off the original one.
But, Why Would You Refinance a Mortgage? Reasons for Mortgage Refinancing
There are several reasons why homeowners choose to refinance their mortgages. The major ones include:
· Obtain a Lower Interest Rate
In case market rates have dropped or your credit has improved since you got your mortgage loan, refinancing will likely save you money by lowering the interest rate. This can sometimes be hundreds or even thousands of dollars in long-term savings. Wouldn’t you refinance if it saved you thousands of dollars?
· Change Mortgage Type
Many people choose to refinance their mortgage to change their rate type, i.e., moving from an adjustable-rate mortgage to the fixed-rate mortgage or vice versa.
Fixed-rate can help homeowners avoid getting affected by market fluctuations, whereas adjustable-rate offers lower rates and payments during the initial loan term.
· Change Loan Term
Homeowners struggling to pay off their mortgage often choose to refinance to increase their loan term, leading to lower monthly payments. Some, however, choose to shorten their loan term through refinancing to lower the interest rate.
· Cash Out Home Equity
Refinancing a mortgage after a while gives homeowners the advantage to cash out home equity. People often choose to do it when faced with a financial emergency or to generate funds for a large purchase.
Does That Mean Every Homeowner Should Refinance?
Refinancing a mortgage may seem like an appealing option. However, it’s not viable for every homeowner. Refinancing may not be a good fit for homeowners who do not plan to live in the house for a long time. In such instances, refinancing can have the opposite effect and cost money. Similarly, refinancing to cash out equity isn’t a wise option unless you’re dealing with a financial emergency because equity is a valuable asset. Always check with your lender to make sure refinancing is a good fit for you and your finances.
The Sum Up
Mortgage refinancing can be a great way to pay of your debt and save money. However, refinancing is not for everyone. Therefore, it’s important to take time, think it out, consider all the pros and cons, and talk to a reliable mortgage broker to make the right decision.
If you reside in Indiana, Northwest Mortgage has got you covered!
Dial +1 260-471-3434 to schedule an appointment with an experienced mortgage refinance expert in Indiana for professional advice and assistance in the refinancing process.