A mortgage refinance is a way of “refinancing” a home loan from one company to another. In the process, you may be able to lower your monthly payment, extend the length of the loan, or interest-only repayment period. This can help you reduce your monthly payments and save some money on interest over time. The following are some of the benefits of a mortgage refinance:
- LOWERS PAYMENTS
When you refinance a home loan, you may be able to lower the monthly payment on the loan. Although this can decrease the amount of money you pay each month, it can also mean that you are paying off less principal and interest over time. Therefore, it is essential to weigh lowering monthly payments against the potential for paying more in interest over time.
- EXISTING MORTGAGE ELIGIBILITY
When you refinance, you may qualify for a new mortgage based on your current income and debt-to-income ratio. In some cases, this means that you can borrow more money than what you originally borrowed. This is especially true if the interest rate on your mortgage has decreased over time. Furthermore, if the value of your home has increased since the original loan was taken out, you may qualify for a higher loan amount.
- MAINTAINS EXISTING HOME EQUITY
Changing your mortgage interest rate or the amount you can borrow will not affect the value of your home. In fact, in many cases, the new lower mortgage interest rate may even help to increase the value of your home over time.
- REPAYMENT AMOUNT IS BASED ON INCOME
Repaying your loan can be difficult and stressful, but if you look at it as something that will eventually decrease over time, it will be easier to manage. The repayment schedule for your refinance is based on your income and financial needs. You can contact your lending institution to adjust the monthly payment amount if a family issue or other personal problem arises. In addition to this, you may be able to consolidate other loans into one regular monthly payment.
- PROPERTY VALUE PROTECTION
The lender that refinances your loan must have the same property value protection as the original lender had when purchasing the home. Therefore, if the value of your home decreases or is foreclosed upon, the lender will not be able to come after your assets to cover any outstanding debts.
- REDUCED INTEREST RATE
When you refinance, you may receive a lower interest rate or longer term on the loan that was initially taken out. Although this can provide some financial benefits, it is crucial to know how long the interest rate will remain low and what the potential payments could become after a few years.