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Published Jan 21, 22
7 min read

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Mortgage refinancing can provide a number of benefits. These will vary from borrower to borrower, depending on what they're looking to achieve. But a refinance will generally provide one or more of the following: A better mortgage rate This may be the most common reason for refinancing. If mortgage rates have fallen since you took out the loan, you can often save money by refinancing you mortgage into a new home loan at current rates.

Lower monthly payments With a lower interest rate, you can get lower monthly payments as well, particularly if your refinanced mortgage has the same payoff date as your old home loan. You can also lower your monthly mortgage payments by extending your payoff date past what it currently is, so you're paying less in principle each month.

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That way, you don't have to worry about your monthly payments increasing if rates should rise. Shorten your term Many borrowers start out with a 30-year home loan, then refinance to a 15-year fixed-rate mortgage after a few years. This allows them to pay the mortgage off faster and save a lot of money in interest over the life of the loan.

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Borrow money With a cash-out refinance, you can borrow against your home equity to obtain funds for any purpose (save on mortgage). You receive a check at closing, the amount of which is added onto the mortgage principle you owe. Since mortgage rates tend to be lower than other types of debt and tax-deductible as well, it can be a very cost-efficient way to borrow.

Mortgage rates are usually lower than the interest rates paid on credit cards and other unsecured debt, so you save on interest payments. Mortgages can also be repaid over longer terms than most other types of debt, up to 30 years, so you can reduce your monthly payments against debt principle, if that's your goal.

Couples can deduct the interest paid on up to $100,000 obtained through a cash-out refinance for debt consolidation; for single persons the limit is $50,000. Combine two mortgages into one You can also combine a second mortgage or HELOC (home equity line of credit) into a single primary mortgage at a lower rate.

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The only way to get them off the mortgage is by refinancing. This can also be used to remove the name of a co-signer whose support is no longer necessary and wishes to be freed of liability.

The biggest reason is to save money on their monthly payment. You can do this through a refinance by moving to a lower interest rate or by eliminating your private mortgage insurance (PMI) payment from the loan amount - refi. Another reason to consider a mortgage refinance is to unlock some of the equity you have built into your home.

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Refinancing can also help you reduce the amount of time you will be paying your home loan. By shaving years off your mortgage, you can unlock more equity faster or walk away with more money if you decide to sell your home. If you are curious about how you could save money, a mortgage refinance calculator can help you compare the costs and benefits of refinancing.

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Refinancing from a 6% interest rate to a 3% interest rate can put over $4,000 back in your pocket every year. Benefits of Refinancing Your Mortgage, There are numerous benefits to refinancing your mortgage. While most of them revolve around reducing your monthly payment, a new mortgage can have a shorter term, stabilize your payment with a fixed interest rate or help you use the equity you have built up in your home.

For example: Refinancing a $250,000 mortgage to lower the interest rate from 6% to 3% would save over $400 per month on interest and principal payments alone. Purchasing your home with less than a 20% down payment means you will probably pay private mortgage insurance (PMI) on top of your principal and interest.

This means you will need to pay cash out of your pocket to lock in your loan. Some mortgages may have prepayment penalties, meaning you’ll pay more if you decide to reduce your balance early. Be sure to understand the terms and conditions before closing (save on mortgage). Extending the life of your home mortgage by several years could put your break-even point further out in the future, depending on how long you intend to live in your home.

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1Set a Goal for Your Mortgage Refinance, Before starting toward refinancing, it’s important to set a goal for starting a new mortgage. Are you interested in saving money on your monthly payment? Or is taking out cash to consolidate debt or fund a big project more important? By setting a clear-cut goal, you can decide the best way to move forward with a refinance.

If you qualify for a VA mortgage refinance or FHA mortgage refinance, you will want to work with lenders who can help you explore those options. 4Select a Mortgage Refinance Lender and Lock Your Refinance Rate, Once you’re satisfied that you’ve found the best option, it’s time to “lock” your rate with the lender.

Mortgage refinancing is a strategy that helps homeowners meet their goals. This could mean refinancing to a lower interest rate or refinancing to a different mortgage term. Refinancing a home is a major financial decision and one that shouldn’t be made without doing all the research. When you refinance, your new lender pays off your old mortgage and replaces it with a new mortgage (save on mortgage).

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Finally, you can lock your rate in with your lender. Make sure to have some cash to pay for things like closing costs, property taxes and other fees. Generally, when you buy a home you have to pay certain closing costs to complete the sale. When you refinance, you’re essentially replacing your original mortgage loan with a new one which means you have to pay closing costs again.

There are no refunds if your application is denied. If the appraisal isn’t included in the application fee, you can expect to pay a professional appraiser anywhere from $300 to $1,000 for their time. Assuming your application is approved, you’ll also have to pay a loan origvination fee. This fee covers the lender’s administrative and financing costs and it’s usually one percentage point of your refinance loan amount. refinance mortgage benefits.

Some of the other costs you may have to pay include a title search fee, an inspection fee, flood certifications, recording fees and attorneys’ fees. These fees can easily increase the cost of a refinance by several hundred dollars or more. The number one reason that many people refinance is to get a lower interest rate on their mortgage.

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Adjustable rate loans can save you money in the short-term but they can be dangerous if your payment suddenly shoots up due to a rate change. The same is true if you’ve got a HELOC that’s approaching the end of its interest-only repayment period. Once you have to start repaying the principal, you could see your payments increase substantially which can put a major strain on your wallet.