Benefits of Refinancing your Home Loan by Joe Dovarro
Well, it is always a question to all of us regarding the benefits of Refinancing a Home Loan. The main reason to refinance a Home Loan is to save on monthly costs incurred. There are mainly two types of Refinances. One being to pull out some equity from your home called as Cash-Out Refinancing. And the other is to change the rate or term of the older loan.
Most of the house owners refinance their home loan in order to pay off their mortgage in a shorter period of time. All this by paying the same amount of money each month as they used to pay in their older loan!
Depending on the amount you owe to your current loan and on the amount of refinance you're opting, you could get up to 125% of the value of your home. You could even refinance your home loan to clear your debts and credit card dues. The benefit here is, rather than paying huge taxes for your credit card interests, you could reduce on tax by Refinancing because mortgage interests do not attract tax.
You could even refinance at a lower rate and save more every month! A major benefit of Refinancing is the ability to lock in a low interest rate for the period of your loan. And in the US, the rates are cutting by the day and the rates are at an all time lows, it's the right time to refinance. By doing this you can be free from the hassles of ARM (Adjustable Rate Mortgage) which change each day and by the time it reaches a high, you'll be repenting.
You could re-model your house and get a high appraisal value. As the interest rates keep changing every week, by selecting a low interest rate, you can save hundreds of dollars every month and thousands of dollars during the period of the loan.
By refinancing your Home loan through the Cash-Out option you could fund your spouse's or children's education or could even fund your business and investments.
Another advantage of Refinancing a Home Loan is that you can shorten the period of the mortgage. i.e. you can change the term of your older 25 year mortgage to a newer 10 year refinance and thus save a lot of interest and if you are lucky enough, you could land up getting a lower interest rate and thus paying the same amount every month.
Some house owners would have paid an extra fee called as Private Mortgage Insurance (PMI).When you can't pay 20% of the loan amount as a down payment, and the loan lender pays more than 80% of the appraised value, you'll have paid it. Now you're in a good situation and you've increased your credit score and made all the payments promptly. So your home equity may be more than 20%. So you can get rid of these unwanted payments by refinancing your home loan.
Though there are many other benefits, just don't get away with the promises of your mortgage company. Check the other options out there and make the right decisions before you land up paying a lot of closing costs and fines.