Home Refinance

Refinancing: When to Change Your Terms

Refinancing a mortgage involves rewriting the original loan terms in order to accomplish a certain goal. The reasons for doing this can be varied. One common reason is to switch to a lower interest rate to save money in interest payments over the life of the loan. Refinancing may also allow for lowering the monthly payment by extending the loan term.
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Refinancing a home may also allow you to obtain additional cash for renovation or expansion. Cash-out refinancing involves replacing the original loan with a larger mortgage, with the difference being paid out as cash. This is similar to a home equity loan, but you will still have only one loan, not two; the refinancing lender may also be able to provide an interest rate lower than that of the original mortgage.

Changing life circumstances can make it difficult to keep up with mortgage payments. A decline in income or an increase in overall expenses could impact your ability to pay each month. That doesn’t mean you have to let the mortgage go bad, rack up late fees, or lower your credit score. When you refinance, the original mortgage is essentially rewritten. This may allow you to extend the mortgage term so that the monthly payments are lower. On the other hand, if you see an increase in your income, you may be able to refinance to a shorter term with a lower interest rate and make larger monthly payments, thereby paying off the mortgage faster.
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