5 Benefits of a Mortgage Refinance

by Keith Benjamin on November 29, 2011

It’s a good idea to write down the reasons why you want to get a refinance on your mortgage loan. The cost of the loan can change at different times. The knowledgable borrower should be able to use this kind of information to take advantage of refinancing their loans when things have changed for the better. The following are several of the most popular reasons for going for a refinance and the subsequent advantages of it.

There are several reasons why people would want to opt for a refinancing. Borrowers mostly want to take advantage of lower interest rates. Some folks just want to get rid of their mortgage sooner. These people that want a shorter repayment schedule will also have to pay more each month. However, if they get a better interest rate as well as a shorter loan term, they get a double benefit from refinancing.

1. You just want to be able to save more money. If you believe that what you are paying for each month on the mortgage is too expensive, then main reason to refinance your loan is to be able to save some money. There are two possibilities where this happens. One is when you get a better and much lower interest rate than the one you have to day. The other is when you get a longer repayment plan. However, once you extend the terms of your loan, you will end up paying more in interest. The reason for this is that you will be adding several more years to your repayment schedule.

2. You want to repay your mortgage faster. When your financial position has improved, or when your salary has increased, you might desire to shorten the repayment schedule on your mortgage. However, your current loan agreement might have terms that do not allow this. It’s then imperative that you meet with your lender so you may discuss the possibility of getting the terms changed on a new loan.

3. You need the cash to spend on other items. Getting extra cash is one of the more common reasons for applying for a refinancing on a mortgage. For example, if a borrower has taken out a variable rate loan, they are prone to suffer from higher interest rates. If this happens, they will need more cash on hand. If interest rates skyrocket then it may be a better idea to extend your mortgage terms to get smaller monthly payments.

4. You want to improve the management of your loans. Sometimes, borrowers tend to take out several loans from various lenders. This complicates the task of loan management. People would rather just have one loan to pay off so they will want to consolidate all of their loans into just a one. This would also be the perfect opportunity to try and get a lower interest rate on the mortgage because you will be getting a newer loan.

5. You want to switch the type of mortgage you are on. This is a great idea if interest rates have been lowered. A borrower who currently has a fixed interest rate loan would want to refinance that loan if interest rates go down. Sometimes you may even want to go for a variable rate loan. However, if you think that interest rates may go up in the future, you may want to stick to a fixed interest rate loan but with lower rates.

Life is hard so I am working part time as a writer. But in real life I am actually a nurse and if you want, please visit my blog about CCRN nurses and CCRN study guide.

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