Refinancing your mortgage simply means replacing your existing mortgage
with another one. Homeowners often refinance their mortgages in order to
get better interest terms and lower mortgage rates. When you refinance
your mortgage, your existing mortgage doesn’t simply disappear. Rather,
it is paid off and a new loan is created. You may be thinking of
refinancing to get lower mortgage rates, or perhaps you’d like to change
your interest terms, for instance, from a variable to a fixed rate.
Here are some signs that it could be a good idea to look into
refinancing:
1.Current Interest Rates Are Lower
Most lenders advise the best time to refinance is when the interest rate
is at least two percentage points below your existing mortgage rate. If
the current interest rate is substantially lower, refinancing can be a
good way to save money. By getting a lower mortgage rate, you will be
able to build equity in your home more quickly.
2. Making a Big Purchase
If you need to make a big purchase, such as a car or education, you can
refinance your mortgage in order to take out a line of credit on your
home. A home equity line of credit allows you to use your home equity as
collateral in a substantial loan. If you choose to refinance and take
out a home equity loan, then the value of your home will be appraised.
This means that if you’ve made substantial improvements to your home
over the years, or the market has gone up, you can take out sizable home
equity lines of credit, while paying off your mortgage.
3. Home Equity
Having greater home equity, meaning the percentage of the home you own
outright, can make it easier to qualify for refinancing. Most lenders
want to see that your equity is at least at 20% before approving a
refinance, however in some cases you can still qualify with less than
that. Put simply, the more equity you have in your home, the better your
refinance terms will be.
Refinancing can be risky and the best way to determine if it’s right for you is
to speak to one of our mortgage professionals. Mortgage rates can
change quickly and we are dedicated to finding you low mortgage rates,
as well as short-term rate promotions. If you are considering
refinancing, but would like more information about how to proceed, contact us today.
source: northwoodmortgage.com