When many people are considering mortgage refinancing, they also wonder if they should refinance their mortgage or not. There are many reasons to refinance a home, so it is important to make sure there is a value to the new mortgage loan when contemplating a refinancing. There is no need for refinancing, without a gain to the new home mortgage.
Lower Monthly Mortgage Loan Payment One of the main reasons people want a home loan for refinancing is to reduce the monthly payment. Refinancing can save you money a month by cutting down on loan payment. The rule of thumb is that a home mortgage refinancing is advantageous if home mortgage payments are reduced by at least 5%. So, if your current mortgage loan payment is $1000, then a payment no more than $950 would need the new home mortgage loan. Most lenders will not support a refinancing if the new mortgage loan does not benefit and many mortgage companies use the 5 percent rule to assess whether or not the new mortgage has a benefit.Feel free to find more information at Island Coast Mortgage Brokers.
Reduce the duration of the house loan Another justification for refinancing is to reduce the period. Many people would refinance the home mortgage loan quicker from a 30-year mortgage to a 15-year mortgage. Not only do you save money on the interest rate by refinancing into a 15-year loan, but you’ll save money over the lifespan of the home loan. The current low interest rates have made 15-year mortgages a popular choice for many homeowners.
Cash Out Mortgage Loans A cash out mortgage is a great opportunity for many homeowners to take advantage of their property’s equity and pay off debts, make home improvements or just get some extra cash out. A cash out mortgage refinancing will help lower total monthly debt payments by consolidating one payment into credit cards, car loans, installment loans and mortgage loans. Many customers have saved thousands of per month by consolidating debts into one payment.
Escrow Funds In turn, a home mortgage refinance can be used to receive a borrower on their escrow account or to help pay off any unpaid property tax. Sometimes some homeowners may get behind on their escrow accounts because property taxes and homeowner’s mortgage insurance shifts annually. If the escrow account becomes too short, in order to catch up on the negative escrow account, many mortgage lenders may raise the month payment. Occasionally, the mortgage payment rises by more than $500. The lender is given the ability to restructure the escrow account by refinancing.