A confusing concept for many of us is whether we should refinance our home and when.
Refinancing is when you obtain a new mortgage to replace your original mortgage on a home. This is usually motivated by a desire to reduce your monthly payments, lower interest rates, take out cash on your home, or even just to change mortgage companies. The bank or lender that grants your the new mortgage pays off your old mortgage with the new mortgage. By getting a better deal on a newer mortgage, it allows you to have more money to pay bills on time and also strengthens your credit score. Another advantage would be it can allow you the opportunity to have more money to use for large purchases such as cars that can in turn decrease your credit card debt.
While there are a few strong advantages to refinancing, there are unfortunately some disadvantages as well. Since you are essentially paying off your old mortgage with your line of home equity credit, there are potential penalties for this. For example, the company you are paired with may have a clause charging you a large amount of money for this process. There could also be additional fees of using a lawyer to determine which company has the best deal for you. When in the starting process of refinancing, it is important to evaluate your home accurately and become well-educated in the process of refinancing so as to avoid mistakes. One of the easiest mistakes to make when refinancing is only focusing on interest rates when there are plenty of other factors to pay attention to.
It is important to know how exactly you will be paying this new loan with its different terms and conditions. It is advised you speak with your mortgage companies as well as others to explore all possible options and to find the one that best suits you. It also could be extremely beneficial to speak with an attorney to have them help you decipher all of the official paperwork of these negotiations and deals. Here at BridgeView we have local recommendations and connections to help our customers discover what is best suited for them.
Next comes the question; When can I refinance? But the answer is not as clear. It is most helpful to sit down and run the numbers as well as know the exact terms of your current contract. Most companies require borrowers to keep the contract for at least 12 months, and it is important to be tactful when beginning to explore other options.