Is Refinancing Really A Beneficial Proposition?

“Is refinancing really for me?” is a question that may cross your mind if you already have a mortgage, especially with the constant bombardment of how loan interest rates are, currently. Refinancing provides qualified homeowners an option of lowering their Texas home mortgage rates or opting for a cash-out and use it for a variety of business or personal needs. While some may argue that there are downsides, such as refinancing fees, prepayment penalties, and paperwork hassles, associated with refinancing; the upsides of opting for refinancing are far more encouraging.  Below are some of the benefits of opting for refinancing of an existing mortgage.

Lower Monthly Payments

You can lower your Texas home mortgage rate by refinancing an existing loan. It means you can save on the monthly payments that you may have been paying. Though this may increase the life of your loan by “starting the clock” over again, overall you will have the advantage of saving money and utilizing it for a variety of purposes such as home improvement, paying school fees, and other household expenditures.

Fixed Rate Versus Adjustable

Some mortgage borrowers may have elected for an adjustable rate mortgage (ARM) to take advantage of extremely low rates for a short period of time (usually 3, 5, 7, or 10 years).  At the end of that term rates can “reset”, and become much higher, even increasing year over year until it reaches its cap. If you are one of such buyers and your rates have significantly increased over time as a result, refinancing will allow you to switch from your adjustable rate mortgage to a fixed-rate loan, with a low interest rate.

Consolidation Benefit

Unlike home equity that is an additional loan to your existing mortgage, refinancing allows you to consolidate two or more of your existing loans to one single loan. Years ago, it was widely popular to use first and second lien loans to purchase a home with a low down payment.  Usually, the rate of interest that you pay on the second loan is much higher than the primary mortgage loan rate. Consolidating all of your loans may help you save money by negotiating for a lower consolidated rate of interest.

Cash-out Benefit

As housing values increase with time, borrowers can cash in on home equity by refinancing and borrowing an amount more than what they owed initially. The difference is paid out to the borrower in cash, and they may utilize it to make some important purchases, pay off the outstanding credit card debts, or fulfill other financial requirements.

Conclusion

Refinancing is as an effective debt restructuring tool, provided you have the knowledge and expertise to strike a deal with the lender. If you live in Texas and are looking for help with refinancing or have any query related to refinance or Texas home mortgage rates, feel free to get in touch with one of our mortgage loan officers and we would be happy to assist.

Ref:

http://www.thefiscaltimes.com/Articles/2012/10/11/7-Pros-and-Cons-to-Refinancing-Your-Mortgage


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