One of the most common terms in the mortgage world is the mortgage refinance, but some people don’t really understand what this means. At VIP Mortgage, our goal is not only to get you the best deals possible, but to inform you on the decisions you’re making.
For people with a long term mortgage, a refinance is a great outlet to help open up a bit of financial breathing room – in some cases, even some major cost savings. Let’s look at some of the basic benefits of a mortgage refinance, which also inform you about the process as well.
Often the primary use of a mortgage refinance is to change the loan format. Many people who begin on adjustable-rate loans find the swings in monthly payments to be difficult to plan for financially, and want to move to a more concrete, fixed-rate system. Refinancing is a great way to do this if the conditions are optimal.
In many of these cases, changing loan formats while also lowering payments is possible. If the market is at least two percentage points lower on mortgage rates than the ones you’re currently paying, you could be a great candidate for a refinance to help lower your payments every month. Even a very small rate change can save you hundreds or even thousands over the life of the loan.
Refinancing a mortgage can help you raise your credit score. The more obvious format here is through lowering payments – this makes it easier to hit deadlines and avoid missed payments, which will help credit score. In addition, though, using those extra profits to pay down debt outside the mortgage itself could go an even longer way to eliminating debt.
Down other lines, some people use refinancing as a way to capitalize on equity in a home. Some people choose to shorten the life of the loan and pay it off more quickly, or pay more reach month. If you have enough equity, you can use what’s called a cash-out refinance, where you receive actual cash for some of your equity. This can be very helpful for paying down a larger debt in another area, or simply for adding to savings.
Interested in learning more about mortgage refinancing, or any of our other mortgage services? Speak to the brokers at VIP Mortgage in Phoenix today.
*The views and opinions expressed are my own and do not necessarily represent the official policy or position of VIP Mortgage, Inc.