It’s a lot of financial responsibility to afford and fund a home. There’s the monthly mortgage, maintenance, insurance, taxes and maybe even condo fees. It can become quite heavy so homeowners should always be looking to lower their monthly fees and the amount of interest they have to pay.
Refinancing is one of the more conventional ways of doing this. There are a few pros and cons to review when making this decision
What is Refinancing?
Basically, this means applying for your loan all over again and hoping to be declared a stronger and safer applicant. With this will come the opportunity to negotiate better terms and can save you some money in both the short and long term.
Pro: Saving Money
This is a big one and is usually the main reason that people refinance their mortgage. As you improve your credit score, grow your career and achieve more of your earning potential, you could be viewed as a strong applicant by a lender. If this is the case then refinancing is worth considering.
Con: You Might have to Sacrifice Certain Aspects of your Mortgage
When going into a refinancing arrangement, it’s important to recognize that you might not walk away with a better deal in every way. You could move from a fixed-rate to an adjustable rate and end up with a higher interest rate. You could decrease the equity in your home. There could even be fees and penalties.
Pro: Access to Funds and Consolidation
Refinancing can free up more of your money for debt repayment or it can open more funds for you to consolidate all your debt. These funds can be used in any way you want including home renovations, travel, retirement or to pursue business ventures.
When it comes to refinancing remember that you’re a customer. Lenders want your business and to see you in a good financial situation that benefits both them and you. To achieve this, they are often open to refinancing if the new financing deal is realistic.