For many homeowners, refinancing their mortgage can be a way to get ahead financially. Refinancing is the act of getting a new mortgage in order to replace the original. Used correctly, it can be a helpful tool in the homeownership journey. As mortgage specialists, our clients often come to us asking if refinancing is the best choice for them. In this article, we are going to examine why a homeowner may want to refinance and what options they might have for doing so.
Reasons To Refinance
There are many reasons that homeowners decide to refinance their home. Here are three of the most common ones that will be the most advantageous to homeowners:
- Low Interest Rates
Sometimes a little bit of number crunching will reveal that you will save money in the long run if you break your contract and opt for a lower interest rate.
- Access to Home Equity
Refinancing can allow you to access up to 80% of your home equity. Home renovations, education, and investment opportunities are all great reasons why you may want to get ahold of that cash.
- Debt Consolidation
If you are overwhelmed by high interest debt, refinancing may be the perfect way to pay it down. By using the equity of your home, you can consolidate a number of outstanding debts in order to get yourself back on track financially.
How to Refinance
Every homeowner has unique needs and reasons for refinancing, so it just makes sense that there are different methods to achieve those goals.
- Break It Off. Breaking your existing mortgage would mean starting a new one with any lender. This is a good choice for those who want a lower interest rate or to access their home’s equity.
- Add It On. In this case you would add on a home equity line of credit. You would only be responsible for interest payments for the term of this line of credit. This could be accessed through your current lender.
- Blend and Extend. In some cases it is possible to have a blended rate. This combines your existing mortgage plus any additional money you borrow. These rates do tend to be higher, so it is important to weigh the previous options before choosing to “blend and extend.”
Refinancing can be a valuable asset for homeowners. Here at Source Mortgage, we would be happy to sit down with you and help you figure out if you should refinance and what method would be the most advantageous for your unique situation. We’re open 7 days a week to serve you, so call us at (403) 341-7800 today!