Are you finding it hard to get cash for a personal emergency or vital home improvement project? Then, you could look at the home itself as a source of money. Mortgage refinancing is essentially borrowing a new loan to pay off the current mortgage balance. There are several instances when it makes financial sense to refinance:
Access Quick Funds
Cash-out mortgage refinancing gives you the option of drawing a portion of your home equity as cash you can withdraw. Cash-out refinancing attracts higher interest rates, but it is still better than a personal loan. Moreover, in some cases, you may not even qualify for a personal loan of the amount you could have accessed from a cash-out refinance.
Cashing out offers the advantage of expenditure flexibility. It comes in handy for emergencies like medical bills or topping up college tuition. You can also use it for major home improvement projects like kitchen remodeling to spruce up the house to sell it. You have a free hand in spending the money on personal needs, at rates better than using your credit card.
Enjoy Lower Interest Rates
Mortgage refinancing allows you to take advantage of lowering interest rates and shortening the mortgage repayment period. You have an extra advantage if you have built up your credit score through consistent payments because you can get even lower interest rates.
You get more favorable terms when you have money for closing because you can negotiate for waivers of private mortgage insurance. With lower installments, you can direct the savings to other investments.
Switch Between Interest Rate Types
You can switch between interest types as rates change in your favor. When interest rates are low, you switch from adjustable mortgage rates (ARM) to fixed rates to lock in the favorable lower rates. You can also do mortgage refinancing to switch from a high fixed rate to lower adjustable rates when rates are projected to fall. These switches ensure you get favorable rates as they change.
Consolidate Your Debts
Mortgage refinancing is a sound financial tactic for debt relief. You can consolidate higher interest short-term debt like credit card debt into the new loan. Then, you pay off these high-interest obligations and fold them into a long-term loan. This tactic can remove hundreds of dollars from your total monthly debt payments and provide much-needed financial relief.
Are you seeking favorable financing for an emergency? Talk to a financial advisor about your options for mortgage refinancing.
Three years ago, my husband and I started saving money for an extensive home renovation project. While we have been able to save a lot of cash over the last three years, we still don’t have enough money to pay for the upcoming remodeling project we plan to do at our home. Therefore, to raise the remaining funds needed, we are going to take out a home equity loan. If you need to do some home remodeling projects around your home, you should consider taking out a home equity loan. This type of loan can help you pay for important items such as new floors, a new roof, or new siding for your home. On this blog, you will discover the types of home equity loans offered at most lending institutions. Enjoy!