Securing a mortgage is seen to be the best alternative in buying a new home without the need to pay the full value immediately. Many homeowners purchased their home using a mortgage, and it is normal in most countries, especially in the United States. The average cost of owning a modest home is estimated at $300,000- $400,000. The cost alone of the home itself (minus real property tax and other clearances) is too heavy for an ordinary individual to shoulder. Thus, these mortgages provide a way for ordinary individuals to own a new home.
However, there are instances when you think of refinancing your mortgage, especially if the mortgage you secured cost you more (higher monthly payments, higher interest payments, unstable interest rate). In the United States alone, an average American homeowner refinances his home mortgage every 4 years. Their finances are changing every 4 years, and such changes comes into the form of higher salary, better credit, or having more equity in their present home. Once such changes happened, many homeowners refinance their mortgages so that they will be able to take the advantage of their new financial situation. Their new financial situation often provides several advantages for homeowners in refinancing their present mortgages. These include the following:
1) Better interest rate If your financial picture has changed over the recent years (higher or improved credit score, larger salary), you may qualify for better interest rate on your present mortgage. It is advantageous for those homeowners who are suffering from high interest rate. It will save you money through lowered monthly payments, thus paying less to the lender over the term of your mortgage.
2) Adjustable monthly payment amounts in mortgage refinance, you will be given an opportunity to either lower or raise the amount of your monthly payments. Raising your monthly payments may result to lower interest payments whereas lowering your monthly payments may result to shorter mortgage repayment term. In most cases, homeowners prefer the former so that they can build equity in their home at a faster rate (that is, cashing out a 30-year mortgage term to just a 15-year term).
3) Qualifying for a fixed rate mortgage (FRM) if you financed your home with an adjustable rate mortgage (ARM), you can refinance it to a fixed rate mortgage. By refinancing it through FRM, you will no longer worry about your monthly payments going up when the lender adjusts the rate.
4) Cashing out equity in your home there are many homeowners who want to cash out equity in their homes for several reasons. If you will consider this, keep in mind that while you own the equity, the money is still the principal loan amount that you need to repay. In this case, you need to consider your budget and how much you can afford to pay before securing a home equity loan.
If you are now within good financial condition, it is best that you consider refinancing your mortgage. This will help you save substantial amount of money from excessive payments you have made from your previous mortgage. You do not only save money, but you have that peace of mind that you will be able to finance your home with ease and without doubt. Mortgage refinance? Ask yourself; maybe, this is now the right time that you consider one.
