Refinancing a property is essentially the process of working with a lender to acquire a new mortgage. Homeowners who have paid off their mortgage for an extended period are more likely to refinance once they’ve built up equity on their property. They may want to shorten the term length of the mortgage or transition from an adjustable-rate mortgage (ARM) to a fixed rate. Here are three reasons why a homeowner might want to look into refinancing their property:
- To get a lower interest rate: Borrowers with a long track record or timely mortgage payments and a good credit score can pursue refinancing as a means of lower interest rates. Those property owners with more assets may want to change their loan structure into a fixed-rate loan for greater stability. Homeowners or property owners also may be able to pursue lower interest rates if there are general reductions in mortgage rates.
- Reduce monthly payments: A lower interest rate can reduce your monthly payments on a mortgage. This status would enable you to be more flexible with your finances should you want to invest in some other venture or if an economic downturn damages some of your other investments.
- Providing more cash: If you need more money for a significant purchase, a financial emergency or to pay off another form of debt (like a credit card balance), refinancing could potentially provide you with the capital you need. This process removes equity from the property. The lender then assesses how much of the appraised value to loan the borrower.
Guiding you through the process of refinancing
There are so many considerations a homeowner has to take into account when deciding to refinance. You have to take careful stock of your finances, assets and debts to determine whether you can benefit from refinancing. If you’re considering a change in your mortgage, get in touch with a lawyer who has experience dealing with property refinancing to explore your options.