Mortgage refinancing is a common and well-known way to, for example, reduce the interest rate or even lower your monthly mortgage payments. Are you curious about other possibilities and wondering what positive impact this could have on the monthly mortgage payments? Read below for more information.
What is a Mortgage Refinance?
First things first, when you have your own home, you get a mortgage with monthly payments to the seller of the home. When you decide to refinance, you get a new mortgage which you use to pay off your old mortgage, thus not going to the home seller.
Do keep in mind that you cannot get a refinancing easily as you are basically applying for a new loan. This means that you need to qualify for the loan and meet the requirements, just as you did for the initial mortgage. Once you have gone through this process, and it is approved, you’ll have your mortgage refinanced.
Reasons to Refinance
There are several reasons why you would decide to get your mortgage refinanced and luckily there are a few options that you get.
First and foremost, the common reason to get a mortgage refinance is to reduce the monthly payments. This is possible because you can get a loan with a lower interest rate, which reduces the amount per month. Another possibility is to extend your loan term. This means that you pay a smaller amount monthly, but you do end up paying more interest overall.
Usually a mortgage has a 30-year loan term, however, you could reduce this to, for example, 15 years. This, in turn, would make it possible to pay off the mortgage loan faster with less interest over the entire loan term. But, do make sure that you get some extra information on the pros and cons of a reduction of the loan term as it could have loopholes or unknown information.
Another reason for you to refinance your mortgage is to switch to a fixed-rate mortgage. This ensures that you don’t have to deal with the constant changes in the interest rates and thus different mortgage payments per month. This takes away the insecurity of interest rates in the future as you have to pay one definite amount.
Mortgage Refinance Lenders
The ultimate tip would be to discuss this matter with several lenders so you can compare these with each other to make a final decision. Furthermore, it is recommended that you are fully aware of the terms and conditions of these refinancing options and loans as you’re looking to decrease your monthly payments and don’t want to end up with a loan that has a negative financial impact.