Unless there is some sort of emergency financial need, most homeowners don’t think about refinancing their home.
They may be making their monthly payments on time with no problems, and are making occasional improvements to their property to increase its value and build equity (which by the way is part and parcel to the reasons for refinancing).
So why would a homeowner who doesn’t need the extra cash want to go through the process of refinancing? The truth is that there are a number of good reasons to refinance even if you’re still able to make your monthly payment.
It’s a Money Saver
Any way you slice it, refinancing your mortgage can potentially save you a significant bundle of money every month. No matter how much money you have or how solid your finances are, everyone wants to save money and have a little extra to put toward other obligations or just to enjoy.
It can make your finances significantly easier to manage and, in many cases, can save a homeowner hundreds and possibly even thousands of dollars in interest payments over the course of the mortgage term.
Refinancing your home in order to get a lower interest rate is one of the smartest moves you can make as a home owner. Part of a lender’s job is to help homeowners make a determination about whether or not the money that you would be saving in interest would be sufficient to cover the cost of the mortgage after it has been refinanced.
If the lender is able to lower the rate enough, that’s potentially several thousand dollars that you will accumulate in saving over the remainder of the loan.
Often times the other financial obligations in life can become burdensome. Credit cards and auto loans can make homeowners feel overwhelmed at times particularly if they have an interest rate that is higher than the homeowner is truly comfortable with.
Many homeowners who are in this kind of situation often look to consolidate their high interest debt into their refinanced mortgage payment. For instance, if a homeowner has a mortgage of $100,000 and also has a $30,000 auto loan, they may be able to refinance their current mortgage for $130,000 and use that extra $30,000 to pay off their car. Or credit cards. Or a student loan.
Debt consolidation through a refinanced mortgage helps to simplify a household budget by putting all of that household’s debt into one convenient monthly payment which is the new mortgage payment.
Who Couldn’t Use a Little Extra Cash
Perhaps the most popular reason that homeowners want to refinance their mortgage loans is just to have some extra cash.
The cash that a refinance provides can be used for anything but most people choose to make home improvement or make repairs on their property in order to up the value on their property and roll the costs of those improvements or repairs into the new monthly mortgage payments.