Refinancing a Mortgage
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Refinancing a Mortgage
Refinancing a mortgage refers to the process of obtaining a new mortgage loan to replace an existing one. The term “loan” may pertain to either an unsecured or a secured loan. Obtaining a new loan to settle an existing unsecured loan is commonly called loan restructuring instead of mortgage refinancing.
The new or refinanced loan may consist of new provisions pertaining to interest rates, monthly amortization and loan term, appraisal of securities or mortgaged properties, and loan value.
People resort to refinancing their existing loans or mortgage for different reasons. If you are planning refinancing a mortgage, you may want to consider the benefits and the right time to apply for it. Below are some situations that may be the right and best time for refinancing.
By refinancing your existing mortgage, you may be able to get extra money from the proceeds of the new loan. Therefore, you can use the money to settle your obligations and for other purposes that may serve you.
Active competition between banks, moneylenders, and other financial institutions is a fact. They outplay each other in getting clients to boost their businesses. One of their ways to get the most number of clients is to offer lower interest rates on the loans they grant to applicants.
If you are experiencing difficulties in paying your monthly mortgage instalments, this may be the right time for you to consider refinancing a mortgage. A lower interest rate on a new loan will give you a breather on your monthly payments.
Lower monthly payments
It may happen that a country’s economy may remain the same for a period of time. Everything remains the same including interest rates. During this period, you may encounter financial difficulties because of various reasons. You may find yourself worrying about losing your home for not being able to pay your monthly mortgage amortization on time.
Therefore, this may be the best time for you to apply for refinancing a mortgage. With an extended amortization period, you will be paying lower monthly amortization regardless of the interest rate that may be the same as that of your previous loan.
Renovating and repair
All residential houses and buildings are subject to wear and tear. Cracked walls and flooring, leaking roofs, and faded painting of your house need refurbishing. Likewise, after 10 or 15 years, your house may already be outmoded. With the increasing prices of construction materials, you may find it difficult to finance the remodeling and repair of your house. Here’s when mortgage refinancing is a great solution.
Although you may not be in a tight financial position, this may be the right time for you to refinance your mortgage. By doing so, you and your family will continue to enjoy the luxury of your newly renovated and remodeled house.
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