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What Are The Pros And Cons Of Refinancing A Mortgage?

January 21, 2021

Image depicting present economic uncertainty. Refinancing a mortgage gives people some financial breathing roomIn times of economic uncertainty, many people find that refinancing their mortgage gives them some financial breathing room by lowering their monthly payments or allowing them to save money in the long run. However, refinancing can be complicated, so it is important to ensure that you know the pros and cons of refinancing mortgage so you will end up in a better position before embarking on this process.

What Is Refinancing Your Mortgage?

Refinancing a mortgage essentially means you are taking out a new loan on your property that often amounts to the remainder of what you owe on it. The new loan will ideally carry better terms than the previous one. The new terms will depend on factors such as how much equity has been built in the home and your credit score at the time of applying.

Pros Of Refinancing Your Mortgage

There are a lot of advantages of refinancing your mortgage, including the possibility of getting a lower interest rate or monthly payment, reducing your payoff term and the ability to cash out equity for other uses.

Lock In Lower Interest Rate

Mortgage interest rate concept. Refinancing a mortgage is the ability to lock in a lower interest rateOne of the biggest pros of refinancing a mortgage is the ability to lock in a lower interest rate. Your financial situation as well as the state of the market and the value of your home may have changed dramatically since you first bought it, and a refinance can help you benefit from a more favorable interest rate. This, in turn, can lead to smaller monthly payments and more of your payment being put toward paying off your principal.

If you expect your cost of living to increase, perhaps because your family is expanding or your income has dropped, a refinance can be a good way to make more room in your monthly budget. In some cases, you may be able to switch from an adjustable-rate to a fixed-rate mortgage if your initial fixed term is about to expire. This can protect you from rises in interest rates in the future. In addition, having the same principal and interest payments each month makes planning and budgeting easier.

Might Be Able To Cash Out

There is a good chance that you have built some equity into your home if you have owned it for many years, particularly if you have been making improvements and making all of your mortgage payments on time. Refinancing can serve as a way to gain access to some of this equity. Many borrowers who refinance use it as an opportunity to take some of the cash from the value of their home and use it for other costs, whether it is sending their children to college or reinvesting in other properties. In addition, if you find that you can afford to pay higher monthly payments, you may be able to shorten your loan term through a refinance, which could lead to significant savings in interest throughout the life of the loan and allow you to fully own your home sooner.

Cons To Refinancing Your Mortgage

Although refinancing makes sense in many cases, there are a few factors to keep in mind when determining whether it is the right move for you.

Savings Could Be Minimal

Although the possibility of locking in a lower interest rate through a refinance is a very attractive one, it is important to keep in mind that the benefits may not be as great if your financial situation or the value of your home have not changed significantly since you first took out the mortgage. You will also need to weigh your savings against the fees that are associated with refinancing to ensure that it is worth proceeding.

Refinancing Takes Time

Refinancing a home written on a notepad and other items on a wooden desk.Some people are drawn to the idea of moving from a 30-year loan to a 15-year term as they can save significant money on interest. In addition, paying off a loan quicker means getting rid of the debt much sooner.

However, it is important to keep in mind that refinancing your home takes a lot of time, resources and money. While it is still a good idea for many people, if you are not going to see a big change in your payments or interest, it may not be worth the effort.

Fees Associated With Refinancing

Refinancing may put you in a better position financially, but you must factor in the costs that are associated with refinancing and evaluate your budget to see exactly how much money you would save before making a decision. A refinance, like the original mortgage, will have closing costs that include appraisal fees, title services, lender origination and administration fees, underwriting fees and credit report fees. These fees may be wrapped up in the amount of your loan, but you will still end up paying them.

Take With Us About Pros And Cons Of Refinancing Mortgage

If you would like some expert guidance on whether refinancing is the right move for you, reach out to My Lending Pal to discuss the pros and cons of refinancing your mortgage.

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MyLendingPal, Inc, NMLS ID #1734346, (www.nmlsconsumeraccess.org); Corporate Office: 5400 Laurel Springs Parkway, Suite 304, Suwanee, GA 30024. Georgia Residential Mortgage Licensee #61544. Principal Loan Originator: Ricky Merchant, NMLS ID: 1517056. Georgia License # 54264. For questions regarding state licensing, please contact (404) 433-8918. Not all products and options are available in all states. Terms are subject to change without notice. Any rates or terms are speculative only and can change without notice.
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MyLendingPal, Inc
MyLendingPal, Inc
5.0
Balachandar Sundaresan
Balachandar Sundaresan
17:30 23 Jun 20
Roger Merchant and his team were very helpful, right from getting a great rate to completing all process on time and being super responsive. Would happily recommend him!!
Dinesh Nair
Dinesh Nair
14:41 30 Jan 20
I would definitely recommend MyLending Pal for all mortgage needs. It all started with a great competitive quote on refinance and excellent service continuing all the way until closing. Priti, Ricky and Roger were a pleasure to work with.
Ramesh Kumar
Ramesh Kumar
02:03 17 Dec 19
I would really recommend Nations First Home Mortgage, if you are looking for the best home mortgage options. I was very much glad to work with this team and they have saved lot of time and money!!
gulshan rai
gulshan rai
03:21 17 Apr 19
I would highly recommend Mr Roger to anyone in the area looking for an amazing lender. He made the mortgage process so easy and effortless. I could tell him and his team were very attentive to all the details that came with applying for a mortgage and were quick to remind me of any deadlines that were approaching.It was super easy to work with Mr Roger.My special thanks to preeti who did an amazing job to get things done in the timely manner. If I had any questions, it was almost like she was waiting at her desk for my phone call to answer the questions immediately. The loans closed on time and without a glitch. I would highly recommend them to anyone
Ajith Nair
Ajith Nair
01:50 13 May 19
We highly recommend Roger for financing mortgage. Roger and his team were excellent through out the process and we had a very smooth purchase. They were always available when we had any questions. It was an amazing experience working with Roger and his team.
Pratul Patwari
Pratul Patwari
13:03 20 Jul 20
Roger Merchant and Priti Vin helped us in buying our first home. They understood our needs and took care of everything for us. They were very good with the communication through the process. They will always be my first choice in future for the mortgage services.
Sujatha Hariharan
Sujatha Hariharan
20:51 26 Jul 20
They were able to find me great rates. Service was quick and communication prompt. The loan process can be daunting as is the document gathering process but this was the easiest and quickest that I have experienced. Highly recommend!
Dinesh Nair
Dinesh Nair
15:53 30 Jul 20
I would definitely recommend MyLending Pal for all mortgage needs. It all started with a great competitive quote on refinance and excellent service continuing all the way until closing. Priti, Ricky and Roger were a pleasure to work with.
Manu Pushpanath
Manu Pushpanath
15:59 29 Jul 20
Great lender to work with. Right from document collection till closing they did it in 2weeks. The fastest closing I heard and get to experience myself. One improvement I suggest is it will be good if the closing attorney can come into the house for completing the closing. Considering current situation it will add a lot of value to the reputation. Thanks Milan and team for a good closing experience.
Sakthi S
Sakthi S
20:46 01 Sep 20
Would definitely recommend Roger and his team.Refinanced for the second time and with roger, I didn’t feel like I refinanced.The process was very smooth and fast.The rates were very competitive and it was amazingworking with Roger and his team.I’d recommend him for sure.
Sunny Patel
Sunny Patel
21:17 01 Sep 20
They were quick, courteous, and professional. They got me an excellent rate and helped make the process smooth. I would recommend using to my friends and family!
Emmitt Rathore
Emmitt Rathore
14:57 22 Dec 20
Roger helped us find an unbeatable rate!His decades of work in the industry made it easy for us to complete many processes with the lender, and helped us close on time!I will definitely be passing the good word around and recommending family and friends to him.I look forward to our next real estate transaction with them.
M Alamoti
M Alamoti
01:02 11 Jan 21
I had the experience of using their service. They know what they are doing. They are very honest, professional and caring. I have no doubt and hesitation to recommend them to anyone who is looking to purchase a home. I am very pleased for their service.
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