The Benefits of Refinancing
Written by: Remington Joseph
Refinancing your home is something that a lot of people should consider doing, but too few know what it is, or how it benefits them. To put it plainly, refinancing your mortgage means renegotiating your existing mortgage loan agreement. By doing this, you can reduce financial stress by replacing your loan with one that better suits your current lifestyle. Not only can this help get you back on track for your financial future, but there are a number of additional benefits that you’ll be able to take advantage of.
Access a Lower Interest Rate
One of the most obvious perks of mortgage refinancing is that it will allow you to get a better interest rate. A low interest rate isn’t everything (you also want to consider your mortgage terms, penalties, etc.), but there is certainly no harm in lowering it!
Consolidate Your Debt
Debt can build up through a number of different factors. Whether it’s through credit cards, school loans, or mortgages, debt can sneak up on you very easily. Even more unfortunate, most types of consumer debt have much higher interest rates than those you would pay on a mortgage. Through refinancing however, you’ll be able to free up cash that can help you pay these other debts. It may increase your mortgage, but it’ll ultimately lower the amount of payments you need to make while lowering the number of sources pulling at your money. The one thing to keep in mind with this strategy however is that you need at least 20 percent equity in your home to qualify.
Access Your Equity
Of all the benefits to take from refinancing, the one that often opens the most doors for people is gaining access to the equity in their home. From the time you purchased your home, equity has been stored, and a refinanced mortgage will allow you to free-up to 80% of your home’s value into cash. Naturally, you can spend this on any recreational activity of your choosing. But we recommend considering investing it into more real estate. When it comes to accessing your home’s equity, you need to be aware that you’re essentially breaking your mortgage early. What this means is that you’ll be subject to certain fees and penalties. We always recommend thinking hard about this decision and speaking with a professional to ensure that it’s the right step for you before shopping for a new mortgage.
Refinancing your mortgage is something we believe should be an essential to all homeowners. It’s important to keep in mind however that isn’t something that should be done thoughtlessly. We advise speaking to a professional, finding out what you’re looking to accomplish by refinancing, and how doing so will help to achieve that goal. If done correctly, refinancing is something that can change your life.
To get started, book a call with one of our real estate coaches. www.coffeewithrec.com