When you remortgage your home, you are essentially getting a new mortgage to pay off the old mortgage. Remortgage is another term for refinance and most homeowners refinance their loan at some point during their home ownership. Sometimes a homeowner may only refinance once and other times they’ll redo the loan multiple times. While there are possible pitfalls with a refi, most of the time these homeowners are redoing the loan because there is a financial benefit that makes it worth it and here are a few reasons why.
You Can Save Money
With today’s real estate economy people are flocking to refinance because they know there is a good chance that they will be able to reduce the interest rate for their mortgage. The reduced rate often results in a lower monthly payment; many of them are freeing up hundreds of dollars each month by doing the refinance. The extra money can then be put toward other bills or responsibilities that strain the finances.
You Can Adjust the Terms
Aside from the interest rate, many homeowners find that remortgaging is a good way to adjust the terms of the loan from something that doesn’t work to something that does. Oftentimes homeowners are locked into a loan with terms that work temporarily but as financial situations change and life adjusts they need something different. Some homeowners switch from an ARM to a fixed loan while others reduce the length of the loan from thirty years to fifteen or twenty. Whatever your needs may be, when you remortgage it’s a good chance to review the current terms and talk to your lender about adjusting them to accommodate what you need now and in the foreseeable future.
You Can Consolidate Debt
When you compare the terms of your mortgage loan with the terms of your other lines of credit you may find that the interest you are paying on your home is much less than the interest your paying on your credit cards or your car. What’s awesome is that when you refinance you can negotiate your mortgage terms and get a rate that is much lower than your other forms of debt. This is why many homeowners choose to refinance using the cash out refinance– they can use the equity to pay off credit cards, cars, and other debts that carry a high interest rate. It helps to consolidate every debt into a home mortgage so that, once complete, there will be one monthly bill that everything has been rolled into. That way homeowners won’t end up with late payments because they accidentally missed a bill, and instead they’ll save money on the exorbitant interest rates they were paying. Consolidating your debt through a loan refinance can have quite an impressive financial payoff.
You Can Remodel Your House
When you pay on a loan after so many years you’ll have some equity built up. If you get the cash out refinance you can tap into this equity and use it however you choose. Remodeling is often the preferable choice in using this money because it raises the overall value of the home. With interest rates as low as they are you can benefit two fold from a cash out. First, you get a new loan with a lower interest rate. Second, you get the money to remodel. Are the old cabinets in your kitchen driving you crazy? Do you need to knock down some walls and expand your living area? Or maybe you want to put in a pool? You have the money to make these adjustments already squirreled away in your equity. Now may be a good time to tap into it.
You Can Take Your Dream Vacation
While equity money is great to be used for a home remodel, many people can’t resist taking a portion of it and going on that vacation they’ve always dreamed of. Financial advisers will almost always recommend that you use the equity money from your home to further investment or increase your home’s value. However, sometimes the best investment is in yourself and a paid vacation can really help de-stress and put life back into perspective. Who doesn’t need time away to sit on a beach and regroup or to fly to Peru and traipse through the Peruvian countryside? A good way to get the best of both worlds is to use most of the equity for investments and only use a small portion for a vacation. That way your equity can build money for you while you spend a week on the beach.
Remortgaging your home may be a way for you to save money and go on your dream vacation– or any other idea you may have. The options open up for you when you refinance. However, there are times when a refinance isn’t beneficial so you need to work closely with your lender during the entire process. There are refinance calculators that you can use to help you determine whether or not it will benefit you the way you need. If you find that the refinance isn’t going to serve you the way you want then walk away. If you find that it does then go ahead and sign the papers, sit back, and enjoy the fruits of your labor.