When Can You Refinance Your Mortgage
Are you enthusiastic to know when can you refinance your mortgage? Well, refinance your mortgage means that you are doing business in your old mortgage for a new one, and possibly a new balance. Moreover, refinance involves the reevaluation of the person or the business credit as well as repayment status. When you get the time to refinance your mortgage, your lender pays your old mortgage with a new one. Most of the borrowers choose to refinance at that time when they can decrease their interest rate and shorten their payment time or take the advantage of turning some of the equity earned by them on their house into cash. In the upcoming paragraph, we will explain one by one these ways.
Refinance To Secure A Lower Interest Rate: The first time of when can you refinance your mortgage is to get a low-interest rate. This is one of the best times to refinance on your ongoing loan. Historically, the rule of thumb is that if you can reduce your interest rate by at least 2% then refinancing is a good idea. However, many of the lenders say the savings of 1% is enough of an incentive to refinance. You will get help to lower your interest rate but also increase the rate at which you build equity in your home. This can decrease the size of your monthly payment.
Refinancing To Shorten The Loan Term: The second time when can you refinance your mortgage is to shorten the loan term. When the rates of interest decrease, the owners of the home sometimes get the chance to refinance an existing loan for another loan that without much change in the monthly payment, has significantly shortened term. For instance, for a 30 year fixed rate mortgage on a $100000 house, refinancing from 9% to 5.5% can decrease the time in half to 15 years with only a slower change in the monthly payment from $805 to $817. In contrast, for 30 years, if you are already at 5.5%, getting a 3.5% mortgage for 15 years would increase your payment to $715. Useful links When can you refinance your mortgage Real Estate Diary