So you are interested in getting a home loan loan refinance. For what reason? You must have this clearly established if you wish to get the right deal for you. Having a clear financial objective makes all the difference.
There are many reasons why home owners show interest in a home loan loan refinance. It's all situation-specific. This should give you a quick peak at the common reasons for refinancing.
To Get a Lump-Sum Amount
One of the reasons borrowers go for a home loan loan refinance is to get a lump-sum amount that they use to fund major expenditures. You can get this lump-sum amount through a cash-out refinance. This type of refinancing allows you to get the cash equivalent of your home equity that's been increasing for the past years. It's more like you are withdrawing from a fattening savings account. You can use the cash for a number of purposes: a vacation, home improvement, a new car, or for college expenses.
To Switch to a Lower Interest Rate
Switching to a lower interest rate is one of the most inviting reasons for refinancing. Interest rates may be at a boom and practically every lender is willing to give low interest rates. You may currently be entrapped in a mortgage deal with an interest rate that is higher than the current general rates. Now this is one good reason for you to get that home loan loan refinance deal closed.
With lower interest rates, you get to decrease your monthly outgoings intended for mortgage payments. This translates to higher real income and a boost in your general lifestyle.
To Switch to Lower Monthly Payments
And that is basically one of your goals when applying for a home loan loan refinance - to take advantage of lower monthly payments. This is especially true for people whose monthly payments had gone beyond what they can expediently manage. You get to decrease your monthly payments by switching to lower interest rates (as already mentioned), by subscribing to an interest-only loan or by extending your mortgage term.
What is an interest-only loan? It's the type of loan where you pay only for the interest within a given period of time, after which you start paying for the principal. You do hold the option of paying for the principal during the period with the amount at your own discretion.
How do you extend your mortgage term? You simply extend, say, a 15-year mortgage to a 30-year mortgage. This spreads out your payment to a longer period, thus, decreasing your monthly payments. This may increase your long-term expenses though.
To Switch to a Fixed-Rate Mortgage
Another good reason for getting a home loan loan refinance is to switch to a fixed rate mortgage. You see, an adjustable rate mortgage exposes you to market instability. Before you know it, you may already be dealing with an unmanageable monthly payment because of surging interest rates. You can remedy your problem and finally gain your peace of mind by refinancing to a more stable fixed-rate mortgage.
To Consolidate Debts
One reason many homeowners are getting into a home loan loan refinance is to finally liberate themselves from their numerous credit card debts that have become unmanageable. Refinance mortgages are secured loans and are more generous in terms of interest rates than your credit card loans and are indeed great substitutes.
For whatever reason, you must deal only with credible lenders. Start scrounging the market for the best lender available.
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