Benefits of Home Re-Financing

Benefits of Home Re-Financing

Benefits of Home Re-Financing

Refinancing refers to the replacement of an existing debt obligation with another debt obligation under different terms. It simply involves paying off an existing mortgage to create a new one.

This process, though it has its own risks, also comes with many benefits, some of which include:

Lower Monthly Payments:

The prospect of making lower monthly payments is one benefit of re-financing. Since the interest rate on mortgage is tied directly to how much is paid on mortgage each month, lower interest rates usually mean lower monthly payments. Homeowners who are able to negotiate lower interest rates when they re-finance their home will likely see the benefit of lower monthly mortgage payments resulting from the decision to re-finance.

Debt Consolidation:

Debt consolidation can also simplify the process of paying monthly bills. Many homeowners; especially those with high interest debts such as credit card debts think of re-financing for the purpose of debt consolidation. A debt consolidation loan gives the homeowner an opportunity of using the existing equity in their home as collateral to get a new low interest loan which will be enough to repay the existing balance on the home as well as a number of other debts such as their credit card debt, car loans, student loans or any other debts the homeowner may have.

Utilizing the Existing Equity in the Home:

Another popular reason for home re-financing is to use the existing equity in the home. Homeowners who have a considerable amount of equity in their home may find they are able to cash out some of this equity for other purposes, such as making improvements to the house, starting a business, taking a vacation or even going back to school. The homeowner is not limited in how they can use the equity in their home and may re-finance a home equity line of credit which can be used for any purpose imaginable. A home equity line of credit is different from a loan because the funds are not disbursed all at once. Rather the funds are made available to the homeowner and the homeowner can withdraw these funds at anytime during the draw period.

As you can see from the above-mentioned points, there are lots of benefits to get from refinancing your home. However, homeowners who are considering re-financing should weigh each of these options with their current financial situation to determine whether or not refinancing is best for them.

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