What is Refinancing?
To review, refinancing means taking out a new loan to replace your existing loan. The new loan pays out the balance on the existing loan, so all you have to worry about is your new loan. The most common reasons to refinance are to:
- Lower your monthly payments
- Lower your interest rate
- Take cash out of your home equity
- Get rid of mortgage insurance
- Change terms or mortgage type
Over time, as you build up your credit score and improve your financial situation, you are more likely to qualify for a better interest rate. Likewise, if you find yourself in a difficult financial position, refinancing could extend the amount of time you have to pay back your loans as well as help you consolidate your debts.
The “Tea” on Refinancing
Refinancing is not all sunshine and rainbows. Just like when you first purchased your home and had to pay closing costs, when you refinance your mortgage, you also have to pay additional costs.
Some loans have penalties for breaking or making changes to the original agreement. There may also be legal fees associated with making a new loan agreement. Lastly, in order to determine the amount of equity you have built up in your home, you will need to have a home appraisal, which also costs money.
To determine if the benefits outweigh the costs, allow our experts to crunch some numbers for you. Connect with a mortgage consultant to see how much money you can save by refinancing!