Availing a new mortgage to replace the existing one is named refinancing and Refinancing is often made available to give the borrowers like you a better interest rate and term. Taking a new loan to pay off your previous loans is something that has caught the fancy of the people. Refinancing option has been availed by the consumers to save money in the home mortgage scheme. Refinancing has been advocated by lot of banks, financial analysts to the consumers who seek to save money, interests or shorten the duration of the loan term.
Refinancing the mortgage comes with variety of questions about which options to choose from.
There are two types of refinancing that is offered:
a) Traditional refinancing or the
b) Cash Out refinancing. Traditional mortgage refinancing is all about taking in a new loan with new interest rates and terms. Cash out Refinancing is all about refinancing the house for a larger amount and taking the difference in cash. Closing cost can be higher in some cases in cash out refinancing model.
Lower monthly payments
Change the term of loan payment period
Interests Rate gets reduced
Pay college funds of children
Use money for home renovation
Clear other debts like credit card or other high interest’s debts
Keep the balance money for future expenses
Every loan comes with a cost and the charges that are often hidden in the bulwark of documents that comes with it. Mortgage refinancing has its own set of charges like an application fees, an appraisal fees among many others.