Perhaps you secured your original loan when rates were higher and you want to take advantage of the current lower rates. Maybe you have an adjustable rate mortgage and you are looking to move into a fixed-rate loan. Both are reasons to refinance now.
When you refinance your mortgage, you are essentially paying off an existing loan and replacing it with a new one. There are many reasons why individuals refinance, such as the opportunity to obtain a lower interest rate, the chance to shorten the term of their current mortgage, the desire to convert from an adjustable-rate mortgage to a fixed-rate mortgage, the opportunity to cash out your home’s equity in order to finance a large purchase, and to consolidate debt. Many homeowners want to pay their home off faster with a shorter term loan and will take advantage of refinancing for this reason.
There are Pros and Cons to all of the above reasons. Refinancing can cost 3% to 6% of the loan’s principal and requires an appraisal, title search and application fees, as the original mortgage did. It is important for a homeowner to determine whether his/her reason for refinancing is truly beneficial.
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