When many people start looking for a new home, they wonder what they should choose and how much of an investment it will be. Although many people aren't quite sure about what their new home will look like, the fact of the matter is that there are many aspects to be mindful of when it comes to real estate. From paying attention to how much things cost to looking carefully at your options, it really pays to understand and apply a little wisdom before you break ground on a project. Check out these posts to find out great tips about real estate.
Refinancing a home loan is a tool you can use whenever you would like, but it is not always a good idea. You will pay fees when you refinance, so you should make sure you have a valid reason to do it. Refinancing eliminates your current loan and replaces it with a brand-new one, and here are four situations when this is a smart move to make.
You Have an ARM That Is Going to Cause an Increase in Your Interest Rate
If you are considering a refinance, it means you have a mortgage. Does your mortgage have a fixed rate of interest or an adjustable rate? An adjustable-rate mortgage (ARM) is one that has a changing rate. Your loan documents will tell you when it will change, and it could be after three, five, or seven years.
If you have an ARM and the rate is about to change, refinancing makes sense as long as you could qualify for a rate that is lower than the rate your mortgage will have after the ARM kicks in and changes.
You Have Equity and Need Cash From It
Two, if your home has equity in it and you need cash, refinancing offers a way to get money from the equity you built up in the house. To do this, you would apply for a new loan for an amount that is higher than the balance you currently owe. If the lender approves you, you will have a new mortgage and cash in your pocket.
Your Credit Improved Since You Got the Loan
Another factor to consider is your credit. If your credit was not good when you took your current loan, refinancing is a good option to use if you now have healthier credit. With better credit now, you will qualify for a lower interest rate. Getting a lower rate because of your improved credit will help you save money.
Your Loan Has PMI
The other reason to refinance is to eliminate the PMI (private mortgage insurance) that you have on your mortgage. If you are paying PMI, an excellent way to eliminate it is by getting a new loan. You will need to make sure you have enough equity in your house before you do this, though.
If you fit into one of these situations, you should consider refinancing. To learn more about rates and eligibility, talk to a real estate lender, like those at Liberty Escrow Inc.
Share12 March 2020
