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Credit Quick Quip: The In’s and Out’s of Refinancing! Part 1

Posted on by joep
20
Oct

The In’s and Out’s of Refinancing 

In today’s blog, we will go over what it means to refinance, how to do it and when you should think about refinancing. Many homeowners refinance for a variety of reasons from combating ever changing rates to saving money on interest rates. 

What is refinancing? 

Refinancing happens when you replace an existing loan with a new loan. When it comes to refinancing your mortgage, homeowners have several options to borrow funds at a better rate, pay back funds at a better rate or withdraw from/ add to your home equity. 

Why Should You Refinance? 

Depending on your current interest rates and financial situation, refinancing could be beneficial to your accounts. It was found that over the past few years, over 40% of homeowners refinanced to reduce their monthly mortgage payments. In the same report, over 20% of homeowners refinanced to change the length of their loan or change the type of loan they were paying on.  

A Few Reasons Homeowners Refinance 

  • Reduction in monthly payments. 
  • Reduction in monthly interest. 
  • Shorter loan pay off. 
  • To change the type of loan (normally to a fixed loan). 
  • Allows to withdraw cash to use for payments or other loans. 
  • Cancel mortgage insurance premiums. 

Timing your refinance 

The next big question you should be asking is “when is a good time to refinance”? The timeframe really depends on your personal circumstances and financial situation, but the best time would be when you qualify for a low enough interest rate that would save you money over the life of your loan even after the cost of the refinance. Even if you can decrease your interest by just 1%, in the long run, you will amass a significant saving over the years! You can also look to refinance if you have gained enough equity to drop PMI which would also save money on those monthly payments. 

  

There is a lot of information to take in when it comes to learning about the in’s and out’s of refinancing so be sure to tune in next week on October 24th for part 2 where we will go over the types of refinance mortgage loans and which one works best for you!