There are lots of reasons you might want to refinance. One of the main reasons homeowners refinance their mortgages is to take advantage of lower interest rates. If rates have lowered since the time of your original mortgage you may refinance your mortgage at a better rate and therefore reduce your monthly payments.
You also might want to switch an adjustable rate mortgage with high or no limits on interest rate increases to a fixed rate mortgage which provides the predictability of knowing exactly what your mortgage payment will be for the life of the loan.
If you are thinking about refinancing your mortgage, you might want to consider other types of mortgages. For example, you might want to look into a mortgage with a shorter term. If you currently have a 30-year fixed rate loan, you might consider refinancing to a 10-, 15-, or 20-year loan which will lower the total amount of interest you will pay over the life of the loan and will let you to pay off your loan faster.
CASH OUT / DEBT CONSOLIDATIONThere are no significant drawbacks to Consolidating Debt, or cashing out equity. However, it should be noted that a considerable amount of equity is necessary to maximize the potential benefits and savings.
Here is an example; If the current Appraised Value of a home is $200,000 and the principal balance is $100,000 the difference of $100,000 is the equity balance. (Note; in order to avoid required PMI, or Mortgage Insurance, a 20% equity position must remain). Therefore we can reduce the $200,000 appraised value by 20% thereby reducing the "usable value" to $160,000. The difference between the usable value (160,000) and the principal balance (100,000) is, of course, $60,000 -- this amount can be used to pay off almost any other existing loan including:
* 2ND Mortgages / Home Equity Loans
* High Interest Credit Cards
* Pool Loans
* Personal Loans
* Student Loans
* Medical Bills
* Car Loans
* Boat Loans
* Furniture Loans...
* ...and much more!
Some of the key advantages associated with Debt Consolidation;
* Paying off high interest rate credit cards.
* One loan, with one low monthly payment.
* Interest portion of mortgage payments are tax deductible.
* 2ND Mortgages can be rolled into the reduced rate 1ST Mortgage.
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