When mortgage rates fall, many homeowners automatically think it’s an excellent time to refinance their homes. At the same time, its valid mortgage can help you lower your interest rates and monthly repayments. It will help if you make smart financial decisions regarding your overall financial well-being. This article explores why you should refinance and gives you step by step process of mortgage refinancing.
But, first, you need to understand what mortgage refinance is and how it works.
What is Mortgage Refinancing?
Refinancing is the process of getting a new home loan by changing the rates and terms of your current mortgage. Some people think that when you refinance, you end up with two loans. No. When you refinance, your old mortgage loan is paid off, and you are then responsible for the new loan.
Why Refinance Your Mortgage?
You should be clear on why you are choosing to refinance home loans. Some of the reasons homeowners opt to refinance mortgage include:
- To secure lower interest rates
This is the most significant reason why homeowners choose to refinance home loans on their existing mortgage. If refinancing can reduce your interest rate by at least 2%, then it is time you have an incentive to refinance your home.
When you reduce your interest rate, you save money which can be geared towards your retirement contribution. It also helps increase your home equity while decreasing your monthly repayments.