Understanding the Benefits of Refinancing Your Home

Written by  //  2015/03/30  //  Home Financing  //  No comments

Refinancing a home mortgage loan is one way for consumers to perform an important financial service for themselves. When refinancing, you replace your existing home mortgage loan with a new one with better terms. Refinancing can save you many thousands of dollars over the life of your mortgage, and refinancing often provides other accompanying benefits. The suggestions below will help you to understand why you might want to refinance your home and the benefits and can provide you and your family.

Why Refinance

One major benefit of refinancing is that it enables you to gain access to the equity in your home. It also provides you with the potential of lowering your interest rates and your monthly mortgage payment. This access makes the consolidation of your other consumer debt possible and easy to manage. A side benefit of cashing out equity in this way is that it allows you to replace non-deductible debt with a form of debt that is deductible in terms of income taxes. In other words, refinancing your home has the potential to help you save additional money from month-to-month.

Government Programs

The U.S. government has mortgage-related programs designed to provide assistance to certain homeowners and first-time home buyers. The Federal Housing Administration (FHA) insures loans made by FHA-approved lenders. This insurance indemnifies these lenders against the risk of loss due to borrower defaults. The U.S. Department of Veterans Affairs (VA) offers long-term mortgage financing assistance to eligible American veterans or their surviving spouses. Somewhat easier to qualify for than traditional bank mortgages, VA loans remain one of the very options open for borrowers who don’t have a full down payment. Our nation’s active and retired veterans can obtain further information about VA loans including current interest rate quotes online. Organizations such as Low VA Rates stand ready to provide veterans with interest rates, terms and other relevant information about VA loan programs 24 hours a day.

Peace of Mind

Some homeowners have a variable-rate mortgage (adjustable-rate mortgage) on their home because it was the only type of mortgage offered to them by their first lender. Other reasons for having a variable-rate home loan include the fact that such loans are easier to qualify for. Sometimes people believe that they will sell their home and move within a few years of closing. Later, they change their mind. All of these are good reasons for taking out a variable-rate loan. If you happen to have a variable or adjustable rate loan and you are confident that you are going to remain at your address for the foreseeable future, it may benefit you to consider refinancing into a fixed-rate loan. The peace of mind that comes with knowing that their mortgage payment will remain constant for the duration of their mortgage is very comforting to many borrowers.

When contemplating a mortgage refinance, it is important for homeowners to have a clear objective in mind. That objective should be in harmony with their family’s long-term financial plan (kids’ college educations, etc.). What is more, refinancing of a home mortgage creates changes. It is something that should be undertaken after the borrower has a clear understanding of their family’s overall financial situation.

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