Refinancing a mortgage is the process of paying off an existing loan and replacing it with a new one. There are many important reasons why homeowners look into refinancing:
- The chance to shorten the term of their mortgage
- The opportunity to obtain a lower interest rate
- The desire to convert from an adjustable-rate mortgage to a fixed-rate mortgage, or vice versa
- The desire to consolidate debt
- The opportunity to tap a home's equity in order to finance a large purchase.
Some of these motivations have pros and cons, and because refinancing can cost between 3 - 6 percent of the loan's principal and requires a title search, appraisal and application fees, it's important for you to decide the reason for refinancing will be beneficial.
Refinancing is an excellent financial decision if it reduces the term of your loan, or helps you build equity quicker. Before you make this decision, take a closer look at your finances and ask yourself a few questions - Will I be saving money and how much? How long do I plan to continue living in the house?
Homeowners can help you find the right refinancing option to make your dream home a reality.