If you’re in the process of refinancing a mortgage loan or considering the option, you might first review the costs and the benefits of the refinancing process. By reviewing this information, you can ensure you make the right choice for your financial future. Our team at Summit Mortgage Corporation has significant experience in the lending field, and in this latest post, we’ll highlight the costs and the benefits of refinancing a mortgage loan.
The benefits of refinancing
First, let’s consider some of the benefits of refinancing your mortgage loan.
Reduce your rate
In some cases, homeowners find that the rate they are paying is outside their budget and leading them into debt. You can refinance your mortgage loan to a lower rate to reduce your costs.
Changing the terms
In refinancing their mortgage, homeowners can also change the term lengths for the mortgage. Going from a longer-term mortgage to a short-term mortgage you can reduce your rate, as lenders don’t have to calculate inflation into the process. However, your monthly payments might be higher as a result because you’re paying the same amount over a shorter period.
Cashing out equity
In refinancing your mortgage, you may also be able to cash out your existing home equity. This is ideal for those who have other expenses that require liquid assets for the coming months, such as a business opportunity.
The costs of refinancing
Now we’ll review the negatives some face in the refinancing process:
Some lenders have penalties for refinancing a mortgage loan before the term is completed.
Potential for higher cost
If you refinance to a variable rate mortgage and the economic environment changes, you could be spending more money for a higher rate.
In some cases, when you refinance you’ll have to pay for the mortgage over a longer period of time. So, you should consider your future and whether you wish to be paying off your mortgage over the coming years.