You must have heard about refinancing from many people. Some people say that it worth taking a refinance and some say it doesn’t. But what really is a refinance? Or what are the benefits of the refinance? Well, before we tell you what is refinance, we would first like to explain the mortgage. Let’s start.
Mortgage – It is a legal agreement between two parties. a lender and a borrower. The borrower lends a particular amount from the lender that has to be paid within a specific given timeframe and with a decided interest rate.
Refinance – It is a process of either revising or replacing the terms of an existing mortgage/home loan. Basically, the major reason why people opt for the refinance option is when their existing mortgage is either expensive, risky, or their financial circumstances are not in favor to pay off the loan on time. When we say expensive or risky mortgage, it means, the interest rate of the mortgage is high and it is for the long term but the financial situations aren’t good enough to pay back the loan.
Advantages of Refinance – There are many advantages of refinancing a mortgage. Today, we will be sharing some advantages of refinance mortgage with you. Let’s begin!
Interest Rate – It is one of the most common reasons why people choose to refinance. When you opt for a refinance, you get a lower interest rate. If the mortgage rates fall, then you get a mortgage at a better interest rate. If you pay your EMI (equated monthly installment) or monthly installments timely, then your credit score improves hence, you are eligible for the other mortgage or refinance at a better interest rate.
Monthly Payments/ EMI – When you get the mortgage at a low-interest rate, your monthly installments of the refinance will be comparatively lower than the previous loan. Also, you can lower your EMI by extending the payoff dates of the mortgage.
Tip to improve your credit history – You should pay all your EMIs on time as it improves your credit history hence, it improves your credit score and you get a mortgage easily, quickly, and at good interest rates.
Term of the Mortgage – Generally, the mortgage is for 15 – 30 years. However, many people start their mortgage journey with 30 years term but later they opt for 15 years or fixed rate in order to pay off their mortgage quickly to save money on the interest rate of the mortgage.
While you apply for the refinance, you get the opportunity to shorten your mortgage term. The interest rate on the 15-year mortgage is lower than 30 years.
Settle the Existing Mortgage – By opting for the refinance, you can easily pay off your existing mortgage. This is also one of the major reasons why many people choose the refinance. Some time due to changes in financial circumstances, people are not able to pay off their mortgage on time so in that scenario, getting a refinance can become a big help as you got to pay off the existing mortgage and also, get a better interest rate if opt for refinancing.
How Refinance is Worth?
In general, getting a refinance is worth and there are two major reasons for this. The first is to get the mortgage at a better or lower interest rate. The second is to get more benefits for e.g. pay off the previous mortgage, getting the mortgage in short term, etc.
The above-mentioned are the benefits of the refinance. Hence, it would not be incorrect to say that getting a refinance is totally worth to opt. However, you should always check the terms and conditions of the refinance before you opt so that you don’t regret your decision and also, don’t forget to consult with a mortgage broker as they can guide you better and deeply as per your requirements and eligibility for the mortgage.
The Final Thought
Are you thinking of getting a refinance? If yes, then you must have a brief knowledge about the refinance in order to avail maximum benefits. A refinance can make a huge difference in your mortgage journey as it has a lot of benefits that we have discussed above. However, you should take a well-knowledgeable and experienced mortgage expert’s assistance while getting a refinance for more and better understanding about the refinance. In case, you are now thinking to get a refinance, then don’t forget to take these advantages in your consideration. This will help you understand the refinance easily and better. Also, when the mortgage specialist will explain about the refinance you will understand the refinance in a better and easy way.