There are a multitude of reasons why you might want to take advantage of mortgage refinance. Here are a few of the main reasons:
To secure a low, fixed rate. Since Interest rates have probably dropped since you took out your current mortgage, you can refinance to take advantage of current historic low rates in mid 4%’s range. A percent decrease in your rate can equal thousand if not hunderds of thousands of dollars in saved intrest expense.
To switch to another type of mortgage. Mortgage refinance enables you to switch from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage or vice versa. Some homeowners take out an ARM only to discover that payment fluctuations are too stressful. You can refinance to switch to a fixed-rate mortgage easily.
To improve the terms of an ARM. Adjustable-rate mortgages come with features that you might improve upon with mortgage refinance. For example, ARMs have caps on how much payments can increase per year and over the life of the loan. If you are dissatisfied with your current caps, you can refinance for better features.
To lower monthly payments. You can use mortgage refinance to extend the repayment term of your mortgage or to lower your interest rates, and both options will substantially reduce your monthly payments.
To build equity in your home faster. Some homeowners use a mortgage refinance to take out a shorter-term mortgage to pay off the loan faster with less interest expense. If you choose this option, you will build equity in your home more quickly.
To convert home equity into cash. If your home has appreciated in value or if you are willing to take out a mortgage with a larger principal, you can take the difference in cash to cover your expenses.
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As the mortgage market continues to deteriorate in the current housing slump, many people are finding their mortgage payments more and more suffocating. It is no secret that foreclosure rates have skyrocketed during the past year, especially among subprime or poor credit borrowers. The spike has been a result of the many people who got into more expensive loans than they could afford, and others who jumped into adjustable rate mortgages they did not understand. If your mortgage is putting a stranglehold on your finances, or if you are looking to get into an affordable mortgage, consider the following suggestions.
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