What is a Mortgage Refinance?
A mortgage refinance is when you take out a mortgage on your home to pay off an existing mortgage on your home. Typically this is done when the current market conditions allow for mortgage loans that are more favorable then the loan the homeowner currently has. A mortgage refinance may allow you to lower your monthly payment, pay off the mortgage faster, or put money into your pocket by tapping into your home's equity.
When you purchased your home the financial market determined the interest rates of your mortgage. Even though factors such as your credit score, amount of down payment and level of debt to income influenced the rate you received the biggest factor affecting your mortgage interest rate was the market’s prevailing interest rates at the time. As you are likely aware, there is a significant relationship between interest rates and mortgage payments. By refinancing when mortgage rates are lower your essentially trade your old, high rate for a new, low rate which lowers your monthly mortgage payment.
Many times homeowners find that by refinancing they can shorten the amount of time they have to pay their mortgage. For example, say you have a 30 year mortgage that you took out 7 years ago at 7.5% for $200,000. Your monthly payment has been $1,398.43 and you currently owe $183,668. If you could refinance your mortgage at 5.5% for 20 years your monthly payment would go down to $1,263.43 (saving $135 a month) and you would pay the mortgage off 3 years faster. In this situation the mortgage refinance would save you a whopping $82,744.08 in interest.
For most people their home is one of the most valuable assets they own. If you find yourself in a situation where you need (or want) extra cash it is often possible to refinance your home mortgage and put cash directly into your bank account. “Cash-out” refinances are a convenient way to pay for home repairs, college expenses or medical bills.
As you can see, a mortgage refinance may be able to help you in many different ways.
When you purchased your home the financial market determined the interest rates of your mortgage. Even though factors such as your credit score, amount of down payment and level of debt to income influenced the rate you received the biggest factor affecting your mortgage interest rate was the market’s prevailing interest rates at the time. As you are likely aware, there is a significant relationship between interest rates and mortgage payments. By refinancing when mortgage rates are lower your essentially trade your old, high rate for a new, low rate which lowers your monthly mortgage payment.
Many times homeowners find that by refinancing they can shorten the amount of time they have to pay their mortgage. For example, say you have a 30 year mortgage that you took out 7 years ago at 7.5% for $200,000. Your monthly payment has been $1,398.43 and you currently owe $183,668. If you could refinance your mortgage at 5.5% for 20 years your monthly payment would go down to $1,263.43 (saving $135 a month) and you would pay the mortgage off 3 years faster. In this situation the mortgage refinance would save you a whopping $82,744.08 in interest.
For most people their home is one of the most valuable assets they own. If you find yourself in a situation where you need (or want) extra cash it is often possible to refinance your home mortgage and put cash directly into your bank account. “Cash-out” refinances are a convenient way to pay for home repairs, college expenses or medical bills.
As you can see, a mortgage refinance may be able to help you in many different ways.
posted by Mister Refi | 12:23 PM
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