Planning On Refinancing Your Home Mortgage? Read This Before You Do

There comes a time in everyone’s lives when you have to power through and make some tough decisions – and refinancing your home mortgage is definitely one of those difficult choices. Most of the time people are under the impression that once you get yourself home after the tedious effort of taking out a 30-year mortgage, then you have nothing to worry about. However, life isn’t always that straightforward, and especially after the disaster that was the year 2020, you might have to refinance your home loan.

Pexels | Homeowners with minimal savings are increasingly looking to refinance their mortgage

So, what is the need for this? Why do people do it? What benefit comes from refinancing your home mortgage? We’re here to push all your confusion away.

Understanding Mortgage Refinancing

When you refinance your mortgage, it means that you are essentially trading your current mortgage with a new one. So, when you opt for refinancing, your lender (bank or any third party) pays off your existing loan and you get yourself a new one. Now, you are probably wondering what is the use of this? Usually, in many cases, people who go for refinancing their home mortgage are either taking advantage of the lower market interest rates, are looking to cash out a portion of the equity, or are simply reducing the amount of their monthly payment with a long-term repayment plan.

Is it Worth It?

Experts only suggest refinancing your mortgage if you are getting a deal that will lower the interest rate by half. The second prerequisite is that you plan to stick around in the same house for the next couple of years. If you already tick all the boxes then what you are waiting for? It’s time to get your refinancing ducks in a row.

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Benefits of Refinancing

Sure you may be familiar with the concept of refinancing, but there’s much more to it. Here are the numerous benefits that come with it:

1. Saving cash – your new refinance plan will allow you to save more money every month than you did before.
2. Shorten the duration – some owners even refinance their home mortgages into a loan with a shorter term and low interest rates.
3. Farewell Private Mortgage insurance – if you have managed to have your home equity above 20 percent then you won’t need a PMI in order to refinance into a new loan.
4. Get yourself a fixed-rate mortgage – if your house is in an adjustable-rate mortgage that is on its way to be reset and you are predicting that the interest rates may rise, then you can refinance into a fixed loan rate.

Pexels | Be sure to familiarize yourself with the terms of agreement before making a decision

There you have it, all you need to know about refinancing your home mortgage. If this sounds like something you can easily get done then what are you waiting for? It’s time to reach out to your lender!