Everything You Need to Know About Refinancing
Have you heard that interest rates are low and that a refinance might save you money?
Did you hear a co-worker, radio commercial or a spot on Good Morning America talking about how you might be able to save hundreds of dollars on your monthly mortgage payment?
Do you have questions about how this works or whether it is too good to be true?
Let us help. Here are the basics.
Definition
Webster’s Dictionary tells us that to refinance is to finance something anew.
Simply put, that is what happens when you refinance your house. Your mortgage bank pays off your old loan and gives you a new loan at current market rates.
And, if interest rates are lower when you choose to refinance than when you took out your original mortgage loan, you get to benefit from the new lower interest rate. That means, you pay less each month on your house payment while still continuing to build equity in your home.
Why Do People Refinance?
Typically, people refinance for the following reasons:
- They can save money on their current monthly payments by taking out a mortgage at a lower rate.
- They would like to pay off their loan faster and would like to switch from a 30 year loan to a 10 or 15 year loan.
- They would like to cash out some of the equity they have built up in their home
- They have an adjustable rate mortgage (ARM) or an interest only mortgage and would like to move to a fixed rate mortgage.
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