Do Refinancing Home Loans Make Sense?

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Do Refinancing Home Loans Make Sense?

18 June 2021
 Categories: Finance & Money, Blog

Do you need money to remodel your house but find all lending options expensive? Try refinancing home loans. Many homeowners are shy to think of refinancing because of misinformation. But home refinancing has major benefits if you use the right approach. It allows you to take a new home loan at a lower interest rate. You pay off the old loan and put the rest to other uses. It makes sense to use refinancing home loans because they offer several advantages:

Lower Mortgage Payments 

The lending industry has become very competitive recently, pushing mortgage rates lower. You can shop around for low rates at the same mortgage duration. If you were paying off a 30-year home loan at 3.75% APR and get a new offer at 3.0% APR, you have a substantial advantage. 

A refinancing home loan program lets you take a new loan to pay off the old loan and continue paying lower monthly payments. If your credit rating has improved since taking the last mortgage, you will have a very great advantage in accessing low-interest rates.

Access Equity in Your Home 

The portion of the loan you have already paid off is equity in your home. For example, if your original loan was $500,000 and you have already paid off $250,000, that same $250,000 is the equity you can access. Some lenders allow you to cash out this equity from your account.

One of the most popular ways of using this equity is in building a real estate portfolio. You can use refinancing home loans to buy a new home. For example, if your equity is $250,000, you may find that a lender is willing to extend up to 80% of this amount for a purchase. The advantage is that you don't have to pay mortgage insurance on the new loan. You can also use this money on a home improvement project. 

Merge Loans and Improve Finances 

Refinance home loan lending allows you to merge different loans and pay them off with a lower interest loan against your home. It makes it easier to track your repayments and organize your finances. 

Your credit rating improves when you pay off one lower loan at a lower interest rate. If you are squeezed financially, you can negotiate for a longer payment duration. It eases your finances while giving you room to build your credit rating. 

Are you looking for friendly and affordable financing for a home improvement project? Talk to a lender about refinancing home loans