Is Refinancing Your Home Right for You?
By Susan M. Keenan
Photo: © Kutay Tanir - iStockphoto.com
Homeowners often find themselves in a position to refinance an existing home loan. The reasons to do so are varied. In many cases, the interest rates on the currently available mortgages have dropped and the homeowner can realize monthly savings if their home is refinanced.
If your income has increased dramatically and you can now afford a home loan with a shorter term, you may want to refinance. Remember that on shorter term loans the monthly payments will be larger, but the loan will also be paid off much more quickly.
Some homeowners find themselves in the uncomfortable position of dealing with rising interest rates as their adjustable rate mortgages (ARMs) switch up to the next level. |
Higher mortgage payments can place homeowners in a financial bind that screams for the relief of a home refinance.
If you are a homeowner who originally purchased a home as a starter home but have decided to live there long term, the original home loan might not be amenable to this new circumstance. In this case, refinancing the home can be a wise option.
If you are a homeowner with an interest only mortgage, you may prefer to build up equity in your home now, rather than waiting for the interest only portion of your home loan to switch over. Refinancing an existing interest only mortgage can bring savings over an extended period of time and help build up equity faster.
Refinancing a home is also a good way to get additional cash for remodeling purposes. Depending on the terms of the refinance loan, you might be able to borrow more than you need to pay off the existing loan. This will give you additional funds for remodeling projects.
Whatever the reason for refinancing a loan, the end result is usually a positive one. The homeowner typically saves money, builds up equity faster, or both. |
