HOME REFINANCE is creating a new loan to replace the current loan. This process can be done with another lender, as you do not need to do it with your current lender. Your new loan will pay off the existing loan and your debt with the original lender will be paid off. This process is equivalent to “buying back your home”. Some individuals choose HOME REFINANCE by lengthening the term of the mortgage to lower their monthly payments. Others choose to earn money through their home by borrowing against the equity in that property.
Reasons for a home refinance
-More affordable monthly payments: if you refinance your home for 20-30 more years after having paid for many years, the monthly payment will be more affordable. That will make it possible for you to have new financial goals.
-Switch to a fixed rate: your original loan is on an adjustable-rate, which exposes you to various interest rate increases. If you refinance your home to a fixed rate you will have more control over your monthly expenses.
-Reduce the term of your loan: if you want to refinance your home to pay it off in less time, it’s a good idea to save interest. Analyze if you can increase your monthly expenses.
Things to keep in mind
Although HOME REFINANCE has its benefits, it is advisable to analyze this procedure before executing it. In the event that you have 5 or 10 years left to pay off your house, it does not make sense to refinance it for another 20 years. In the long run, you will be paying a lot of money in interest, even if the loan to which you adhere has low-interest rates. Also remember that refinancing your home could lower your credit score, which could hurt you in the future.