Thursday, May 1, 2014
?Homeowners who buy property with mortgage loans usually settle into a schedule of monthly expenses they’re already comfortable with. However, life may bring changes to your financial condition and call for a change in your financial obligations. Regardless of your mortgage situation, refinancing your home loan offers several benefits.
1. Less interest
Refinancing involves acquiring a new loan to pay off your current debt. That said, you could still use your property as collateral in your new mortgage loan. You may choose a home loan with a lower interest rate. This will help save money that would have gone towards paying for a higher interest rate in your existing loan.
2. Different loan structure
A fixed interest rate can be a great benefit, since the interest rates you’re paying for won’t be affected by the fluctuating market conditions. This makes for more predictable monthly payments. If your current home loan is on a variable interest rate, opting for a different loan structure can be an advantage.
3. Extended loan period
A common reason for refinancing is to make the monthly payments lower and more manageable. Choosing a new home loan that has a longer loan period will achieve this goal. Note that you will potentially be paying for more on interest rates later on. However, this can be a great solution for homeowners who are having difficulty in their monthly loan payments, as the worst-case scenario for mortgage loans is foreclosure.
4. Free up cash
Properties naturally appreciate over time. If your property has appreciated over the years but you have still not paid off your mortgage, now is a good time to refinance your loan. The new home loan will be based on your home’s current higher valuation. The difference between your home’s current value and its value at the time of the previous loan will be used to pay off your old loan, thus freeing up some cash you may use for other expenses.