Benefits Of Re Financing

Benefits Of Re Financing

Benefits of​ Re-Financing
There are a​ number of​ benefits which may be associated with re-financing a​ home .​
While there are some situations where re-financing is​ not the right decision, there are a​ host of​ benefits which can be gained from re-financing under favorable conditions .​
Some of​ these benefits include lower monthly payments, debt consolidation and the ability to​ utilize the existing equity in​ the home .​
Homeowners who are considering re-financing should consider each of​ these options with their current financial situation to​ determine whether or​ not they wish to​ re-finance their home .​
Lower Monthly Payments
For many homeowners the possibility of​ lower monthly payments is​ a​ very appealing benefit of​ re-financing .​
Many homeowners live paycheck to​ paycheck and for these homeowners finding an​ opportunity to​ increase their savings can be a​ monumental feat .​
Homeowners who are able to​ negotiate lower interest rates when they re-finance their home will likely see the benefit of​ lower monthly mortgage payments resulting from the decision to​ re-finance.
Each month homeowners submit a​ mortgage payment .​
This payment is​ typically used to​ repay a​ portion of​ the interest as​ well as​ a​ portion of​ the principle on the loan .​
Homeowners who are able to​ refinance their loan at​ a​ lower interest rate may see a​ decrease in​ the amount they are paying in​ both interest and principle .​
This may be due to​ the lower interest rate as​ well as​ the lower remaining balance .​
When a​ home is​ re-financed, a​ second mortgage is​ taken out to​ repay the first mortgage .​
If the existing mortgage was already a​ few years old, it​ is​ likely the homeowner already had some equity and had paid off some of​ the previous principle balance .​
This enables the homeowner to​ take out a​ smaller mortgage when they re-finance their home because they are repaying a​ smaller debt than the original purchase price of​ the home .​
Debt Consolidation
Some homeowners begin to​ investigate re-financing for the purpose of​ debt consolidation .​
This is​ especially true for homeowners who have high interest debts such as​ credit card debts .​
a​ debt consolidation loan enables the homeowner to​ use the existing equity in​ their home as​ collateral to​ secure a​ low interest loan which is​ large enough to​ repay the existing balance on the home as​ well as​ a​ number of​ other debts such as​ credit card debt, car loans, student loans or​ any other debts the homeowner may have .​
When re-financing is​ done of​ the purpose of​ debt consolidation there is​ not always an​ overall increase in​ savings .​
Those who are seeking to​ consolidate their debts are often struggling with their monthly payments and are seeking an​ option which makes it​ easier for the homeowner to​ manage their monthly bills .​
Additionally, debt consolidation can also simplify the process of​ paying monthly bills .​
Homeowners who are apprehensive about participating in​ monthly bill pay programs may be overwhelmed by the amount of​ bills they have to​ pay each month .​
Even if​ the value of​ these bills is​ not worrisome just the act of​ writing several checks each month and ensuring they are sent, on time, to​ the correct location can be overwhelming .​
For this reason, many homeowners often re-finance their mortgage to​ minimize the amount of​ payments they are making each month .​
Using the Existing Equity in​ the Home
Another popular reason for re-financing is​ to​ use the existing equity in​ the home .​
Homeowners who have a​ considerable amount of​ equity in​ their home may find they are able to​ cash out some of​ this equity for other purposes .​
This may include making improvements to​ the home, starting a​ business, taking a​ dream vacation or​ pursuing a​ higher degree of​ education .​
The homeowner is​ not limited in​ how they can use the equity in​ their home and may re-finance a​ home equity line of​ credit which can be used for any purpose imaginable .​
a​ home equity line of​ credit is​ different from a​ loan because the funds are not disbursed all at​ once .​
Rather the funds are made available to​ the homeowner and the homeowner can withdraw these finds at​ anytime during the draw period .​

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