Times When You Should Consider A Mortgage Refinance
A mortgage is one of the most significant financial commitments you will make in your adulthood. When you first buy your house, your options for the mortgage may be limited by your credit history, your first-time buyer status, and a variety of other factors. This can leave you paying far more than you might otherwise pay with more favorable terms. That's why you should consider refinancing your home at some point in your mortgage process. Here's a look at some reasons you might want to refinance your mortgage.
Lower Interest Rates
The volatility of the lending market can lead to changes in the prevailing interest rates over the life of your mortgage. If interest rates drop significantly below what your current mortgage reflects, you might want to consider refinancing your mortgage. With lower interest rates comes a lower payment, which could save you money over the life of the loan.
Better Credit History
If you were approved for a mortgage with a higher interest rate and points on the loan because your credit was less than stellar, you should consider refinancing that mortgage after a year or two of consistent payments and improved credit history. You will typically qualify for a lower interest rate and may even drop the points of your loan when you refinance, lowering your payment and reducing what you pay in total interest on the mortgage.
You Have Equity
As you pay on your mortgage, the amount you owe is reduced in comparison to the value of the property. When you've paid enough on the loan that the property is worth significantly more than your outstanding mortgage balance, you have equity in your home. You can refinance your mortgage for the full value of the home and draw the difference out.
For example, if you have a $150,000 mortgage and you only owe about $75,000 on the principal, that means you have $75,000 in equity in the home. You can refinance your mortgage for the full value and draw that additional $75,000 as a direct payment to cover a financial emergency, a remodel, or other costs.
These are three of the most common times to consider refinancing your mortgage. Whether you choose to refinance with your current mortgage holder or you opt to seek a different lender for your refinanced mortgage, you have options that may not have been available when you first bought your home.
For more information, contact a local company, like AJM Mortgage Inc.