4 Pros and 3 cons of mortgage refinancing
Meeting financial goal takes a very important role in a personal long-term financial plan. Sometimes mortgage refinancing is a sound financial choice to help you meet these goals. But often refinancing can cause more harm than good. Here are some tips for your Alamogordo real estate.
Therefore it is very necessary for you to know both the pros and cons of refinancing.
4 Pros of refinancing
- 1.Lowers interest rate: You may have taken your last mortgage loan several years ago and now the interest rates might have been revised. Therefore by opting for mortgage refinancing, you can enjoy lower interest rates, low payments and therefore save money.
- 2.Lowers your mortgage payments: If your previous mortgage was an adjustable rate mortgage (ARM), then you may find it difficult to adjust with the changing interest rates. Then, mortgage refinancing is the best option to change your previous ARM in to a fixed rate mortgage.
- 3.Revise the term of the loan: It may happen that now your financial condition has improved and you can pay more each month. With a refinancing, you will be able to shorten the term of your loan, thereby saving dollars on the interest rates.
- 4.Enables you to pay off loan faster: With refinancing, you can pay off your loan faster because refinancing helps you to shorten the term of the loan according to your affordability.
3 Cons of refinancing
- 1.Extending the term may cost you: If you extend the term of your loan through refinancing, it may result in high total interest payment, even if the rate is low.
- 2.Closing costs can be substantial: You have to pay closing costs which can often be substantial. These closing costs can counteract any savings that you could get from refinancing.
- 3.Cash-out refinancing reduces home equity: Refinancing to a larger mortgage to take out cash may reduce your home equity. If later, home prices fall, then your mortgage amount will become higher than your home's value.
If you are going for mortgage refinancing, you should be having specific goals in mind. Whatever are the reasons behind your refinancing, it is very important to define your goals and find the best way to achieve them. A refinance provides you the best opportunity to rework your mortgage into something that works for you. ]For more tips on this and any Alamogordo real estate information, please contact me today.