Refinancing your home can seem like a great idea for anyone wanting to lower their mortgage payments or trying to find extra money for life’s unexpected costs. While it may seem like an easy process, refinancing can be difficult for the average homeowner to understand.
Most people consider two types of refinancing: Rate and Term and Cash Out refinancing. Rate and term refinancing is defined as a loan that is used to save money on an existing home loan with term being the number of years it would take to repay the loan. People who choose rate and term refinancing usually do so in order to shorten the amount of time that they will be required to repay their loan, or in order to get a lower rate on their existing mortgage.
Cash out refinance is defined as a loan that is taken out on a home that is more than the existing loan. For instance, if a homeowner has a mortgage for $100,000, they can use a cash out loan and refinance their home for $150,000. The remaining balance of $50,000 would be given to the homeowner for their personal use. Most people chose to use the extra income for home repairs or to make a single large purpose
The majority of people chose to refinance their homes in order to get a lower rate on their mortgage. According to the National Mortgage Database (2015), over half of homeowners (sixty-one percent), refinanced their homes in 2013. Of that, forty-one percent chose to refinance their homes without taking out extra equity while seventeen percent of homeowners borrowed extra money for personal use. The remaining homeowners refinanced investment properties, seasonal homes, or a relative’s home.
Protecting Yourself as a Home buyer
Refinancing your home can be helpful if you are doing so to:
- Save money on an existing loan
- Get a fixed mortgage
- Shorten the term of your loan
- Get a lower interest rate
- Get a lower payment
There are also bad reasons to refinance your home such as:
- To get a longer term loan
- To save money for a new home
- To switch from a fixed-rate loan to an ARM
- To take out cash for large purchases and investments
Making the decision to refinance your home can be very hard for any homeowner. RRC not only understands the complexities of homeownership, but also the questions and concerns that someone may have regarding refinancing. We are committed to helping people through every phase of homeownership. Because of this, we will be offering a workshop on refinancing on December 13, 2016 from 6 p.m. to 8:30 p.m. The workshop will cover every step of the process of refinancing. These seats will fill-up quickly so reserve your seat here.