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. People choose to refinance for various reasons. This can include getting a better interest rate, shortening loan terms, or getting cash-out for home repairs. There are many reasons to want to refinance but you will want to review your refinancing options thoroughly to determine if the decision will benefit you.
Is Refinancing Right For Me?
There are a lot of things to consider when you get a home loan but as you get further into paying off your home, many things can change. A new job, changes in the market, and more, can influence your decision to refinance. It is important to weigh all variables before making the decision to refinance as it can be risky and put you in a worse position financially.
One of the main reasons for refinancing is improving your interest rate. 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, saving you more money over time.
Another reason people choose to refinance is because they want to use the equity in their home for a major purchase of some sort. This can be achieved through a cash-out refinance. When someone chooses this route, the current mortgage balance is replaced with a new mortgage of a higher amount. The difference is paid to the homeowner. This type of refinance is best used for things like home repairs or debt consolidation. Home repairs can increase the value of your home and debt consolidation can save you a great deal of money on interest payments over time. Cash from a cash-out refinance should never be used for things like luxury items or vacations.
What’s The Next Step?
It is important to review your refinancing options thoroughly. Refinancing a mortgage will mean closing costs and other expenses. If refinancing to a lower interest rate, these costs need to be considered to ensure you are saving money in the end. If you are doing a cash-out refinance, you may be extending your loan terms or increasing your monthly payment. Be sure you are comfortable with these changes as they will have a significant impact on your financial future. If you have considered all aspects of refinancing, it is time to contact your lender to get started!
Reach Out Today!
Refinancing can be a great way to save money or to obtain cash for expenses such as home repairs, but it should be done with caution. If you have questions about your options, please reach out to Bill Lavelle at First Financial Bank in Worthington, Ohio today.