When you purchase a home you most likely took out a mortgage to buy the home. If you choose to get a new mortgage to replace the first one, that is called refinancing. If you’re credit is in good shape, refinancing can save you some money by adjusting your interest rate from a variable to a fixed rate mortgage, and allow you to maintain the same payment until you pay off the loan.
Reasons to Refinance
The first reason people consider refinancing a home is get a lower interest rate. Mortgage rates for conventional loans are low thanks to strong backing by two of the world’s largest lending agencies. Some people purchase their home when they aren’t as financially stable as they could be, leading them to a higher interest rate than they would have liked. As your income increases, you might work harder on your credit, and that means you could receive a lower interest rate, so you can save more money per year that could be used to renovate or many other uses.
Another reason people choose to refinance is because they want to use the equity in their home for a major purchase of some sort. In order to this, a homeowner would find out the value of their home, then the lender decides what they think is an appropriate amount of that equity that can be borrowed. Then, the balance owed is subtracted, after that the original mortgage is paid and the owner gets the rest as a loan.
If you purchased your home with cash, you can refinance to pay yourself back. The delayed financing rule means you can make a fast purchase for a foreclosure for example, without using all cash reserves. Before this rule came about, investors has to wait six months to cash out on a home that was just purchase. This rules takes away that waiting period as long as certain rules are followed.
If you think refinancing might be a good idea for you, you’ll want to be sure you’ve looked over your budget to ensure you can cover the costs of the payments as well as how you will be using the loan. If you will be using the equity to increase your home value, you’ll have more revenue if you were to sell your home. But if you are using the equity for something like a car or pay off student loans, you’ll want to be very detailed with your financial plan moving forward.
Reach Out Today!
If you are considering refinancing and aren’t sure if it’s the best choice for your situation, don’t hesitate to contact us at North Star Mortgage in Jacksonville, FL.