Refinancing: What It Is and Why You Would Do It
Refinancing your home can help you and your family in several ways. But do you know what refinancing is and how it can help you?
The surest way to see the benefits of refinancing your home is to know as much as you can about your current mortgage and the loan that will be replacing it.
A lender can help you sort out the details, but when should you speak to one? Knowing the potential benefits of refinancing can give you an idea of when to contact a lender, such as Galaxy Lending, to learn more about the loans available.
Let’s answer the nagging question of “what is refinancing” as well as show you just how refinancing your home can benefit you.
What is Refinancing?
As mentioned above, when you refinance your home, you are replacing your current mortgage with a new one. If you want to refinance and your credit is good, or even just decent, you can see many benefits. If your credit has worsened, or just not improved since you took out the original mortgage, it may be risky. However, even with poor credit, you may want to refinance. Why? Some benefits don’t rely on credit.
Reasons to Refinance
While you may hear on TV or the radio that interest rates are lower than they have been in years, it is important to look at more than one factor. Understanding all the benefits you may see from refinancing your mortgage can help you choose a new lender and loan that best matches your needs. Many of the common reasons a homeowner will refinance their home loan are listed below. Which ones apply to you?
Lower Your Interest Rate or Payment
Lowering your interest rate can not only help to lower your payment but it can also reduce how much you pay in interest on your loan in the long run. You may also want to reduce your payment by extending the length of the loan. If you have good credit, it will be easier to obtain that lower interest rate. If you are having trouble making your high mortgage payment, extending the number of payments due on your loan can help.
Change the Type of Mortgage
Typically, there are two types of mortgages. If you have a fixed-rate mortgage, then you may want to take a risk with an adjustable-rate mortgage, or ARM. If you have an ARM and want to find a fixed-rate mortgage so your payments are consistent, a lender can help show you your options. Some ARMs offer a fixed-rate at the beginning of the loan and then switch to an adjustable rate after a certain period. Refinancing to a fixed-rate mortgage before the ARM switches to an adjustable interest rate is common among homeowners.
Take Cash Out
If you have equity in your home, you may be able to refinance to take cash out. This means your new mortgage can be for up to the value of your home, even though you owe less on the original loan. You don’t need to cash out all the equity, however. If you want the new loan for just a fraction of what your house is worth but more than you currently owe, you can take that equity out in cash. This extra money can be used for paying off other debt, such as high-interest credit cards, or even for a large purchase such as your kids’ college tuition or a new car.
Pay Off Your Home Faster
Your finances may have changed since you took out the original mortgage on your home. If you are able to pay off the loan faster so you pay less in interest overall and so you can make sure your home is paid for before retirement, it may offer a great benefit. There are shorter term loans you can refinance, so you can ensure your home is paid off quickly. Many shorter-term loans also offer the benefit of a lower interest rate, giving you more than one benefit. If your needs aren’t being met by traditional mortgage loans and their length, you may be able to find a custom-term loan. This allows you to specify your needs and your lender can accommodate them.
Think Refinancing is For You?
If you feel that refinancing your mortgage will offer you any or all the above benefits, you may want to speak to a lender about your options. Knowing what is available given your current loan status, financial ability, and credit can help point you in the right direction.
Galaxy Lending can help you refinance your mortgage. Call us to speak with one of our specialists today and we can start by showing you the options we have for you. We’d love to help you lower your payment, change the type of loan you have, take advantage of the equity in the home, or even shorten the length of the loan.
