A mortgage refinance can benefit the homeowner in many ways. Here are the top three reasons why people adjust their mortgage terms.
A mortgage refinance can benefit the homeowner in many ways. Here are the top three reasons why people adjust their mortgage terms.
View Home Refinancing Guide RSS feedA mortgage refinance can benefit the homeowner in many ways. Here are the top three reasons why people adjust their mortgage terms.
The national housing market has been on a roller coaster ride over the last decade. Fluctuating interest rates and a booming economy has increased the home ownership rate across the nation. According to the U.S. Census Bureau (www.census.gov) 68 percent of families own their own homes, the highest level in 30 years. Chances are you or someone you know owns a home, and may want to know about refinancing. Here are three reasons why people refinance.
Traditionally, when mortgage rates fall two percent below your current rate, it becomes profitable to refinance into a new mortgage. For example, look at what happened in 2002. Interest rates hit historic lows and people took advantage of this. Refinance activity surged as homeowners rushed to swap their mortgage for one with a lower cost. Many people saved big bucks by locking in that lower rate.
Another reason homeowners refinance is to extract some of the equity in their homes. Homeowners can use this equity to pay for remodels, medical costs, or pay down high interest debt. A tool for this is the cash-out refinance. A cash-out refinance is when homeowners withdraw some of the equity from their home while simultaneously adjusting their loan balance and mortgage rate. Their loan balance goes up, and hopefully their mortgage rate goes down. The optimal result would be payments that don't change, or maybe even decline. For this to work, interest rates must be lower than when you signed the original mortgage.
The third reason homeowners refinance is because some mortgages just don't fit well with certain people. If an adjustable rate mortgage is stressing you out or you just don't have the stomach for an interest-only, you can refinance into a loan that will fit your needs.
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