Mortgage Refinancing
Home owners are a select breed, visionaries that enjoy the freedom of owning where they live, and brave enough to deal with the paperwork and financial obligations that comes with such a vision. Mortgages are often seen as something costly, but luckily the option to refinance is available which can save hundreds of dollars each month.
Refinancing has a tendency of going in and out of style based upon interest rates and the lower the rates the better refinancing looks. When you refinance you pay off your old mortgage by taking out a new one. There are several benefits to refinancing but what can that mean if you have a second mortgage?
A second mortgage uses the equity in your home to secure the loan. The first mortgage remains intact which makes a second mortgage completely different then refinancing. Second mortgages must be kept up to date or you risk loosing your house. Now, it is possible to refinance the second mortgage without refinancing your first mortgage. This can be done for several reasons and is usually done with the goal of keeping your house.
The main reason home owners choose to refinance their second mortgage is to take advantage of a change in interest rates. This tends to be the main reason anyone refinances whether it is their first or second mortgage. By refinancing under a better interest rate you will be able to lower your monthly payments on your second mortgage. Changes in your financial situation such as a better credit rating could also mean better rates for your mortgage and so refinancing would be a great route to take. Refinancing your second mortgage can also mean saying good bye to your private mortgage insurance.
Private mortgage insurance can be costly and is used to protect the lender incase the home owner defaults or slips into foreclosure. A high private mortgage insurance or PMI is the result of bad credit, or other instances where the lender is not confident that the home owner will be able to make the scheduled payments.
Refinancing your second mortgage presents the same risks as refinancing a home with only one mortgage. It would be prudent to shop around in order to find the best deal in town so be sure to know your rights when it comes to refinancing and ask whatever questions you may have. Be aware of scam artists and unscrupulous lenders. Read every document handed to you and do not be afraid to negotiate, it is your money after all and if you are refinancing then you could probably use a few extra hundred dollars.
Refinancing your second mortgage may not be right for everyone, so weigh the pros and cons and make decisions based in fact and not the desire for more money.
Deciding to refinance your home mortgage is not an easy thing to do. There are so many variables and possibilities involved with the decision that most just choose to stay with the mortgage they already have. Of course there are plenty of instances in which home owners are willing to go through the process of having their mortgage refinanced for whatever reason. Obtaining a lower interest rate and a lower monthly fee is always among the list of why people choose to refinance, and another reason is the consolidation of debts.
If you have a credit card, chances are you are in some kind of debt. If you own a home, chances are you have a mortgage. Considering this, many home owners choose to refinance as a way to pay off debts whether it is credit or some other financial difficulty. When they go to refinance, home owners will be presented with two options, no cash out refinance or cash out refinance.
Many home owners with debt problems will choose the cash out refinance which puts money in their pockets so they can pay off those credit cards, hospital bills, or other debts. Cash out refinance is where the home owner refinances their home at a higher amount then what is owed so they can then pocket the difference. There are several set backs to a cash out refinance so it would be wise to discuss these with your financial advisor before deciding what course is the best one to take. Factors to consider when deciding between no cash out refinance and cash out refinance is the length of time you have left on your current mortgage, your current interest rates, and what it will cost for the new mortgage.
Refinancing your mortgage is paying off your old mortgage by gaining a new mortgage. Refinancing is seen as the original mortgage whether it is a cash out refinance or not.
While cash out refinances do have their benefits, the drawbacks may simply be too much and therefore not worth it. You will have to be able to pay back the mortgage or else you just may loose your home to foreclosure. Foreclosure is what happens to a home when the owner goes into default with the mortgage payments. The home owner then looses the house and the lender just may go after the owner's wages and other assets in order to recoup any losses. If you doubt that you will be able to pay off the higher interest rates usually associated with cash out refinance then you should definitely reconsider your options.
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