We’ve already brought you a couple of questions that you should ask yourself before you refinance your home. However, in the interest of helping you be as prepared as possible when making this decision, we’ve decided to dig a little deeper. Here are four more questions to ask yourself before you take the leap. Look them over to get a sense of whether or not refinancing is the right move for you.
What are the benefits of refinancing?
Most people would agree that it only makes sense to refinance your mortgage if there is some tangible benefit to doing so. Before you start the refinancing process, it’s important to root out what your specific benefits will be, as well as how great the ultimate payoff to refinancing will be.
In general, there are three major benefits that people see from refinancing:
- A lower monthly payment: Though interest rates are higher now than they’ve been in the recent past, they’re still relatively low from a historical perspective. If you took out your mortgage prior to the financial crisis of 2008, you’ll likely still be able to refinance at a much lower interest rate, which will lower your monthly payment.
- A different loan term: Even if a lower interest rate is not an option, you can also lower your payment by spreading your current loan balance -which is presumably less than the original – over a longer term. Alternatively, you have the option to shorten your loan term and pay it off faster. Though this will likely raise your monthly payment, if you have more income than you did when you first applied for the loan, it could be a shrewd move for your financial future.
- Cashing out your home equity: With a cash-out refinance, you refinance your home for more money than you currently owe on the property. The excess is given to you in the form of funds to be used however you wish.
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The best way to find out how much of a benefit you could get from refinancing is to talk to a lender….