Homeowners typically choose to refinance their home in order to get a lower interest rate, get smaller monthly payments, or to change the length of their mortgage. There are several reasons a homeowner would look into refinancing a mortgage.

Probably the most popular reason homeowners refinance is to get a lower mortgage interest rate, and a smaller monthly payment. Always be sure to know all up the up front costs and fees as these can cut into your savings. A general rule is that a homeowner should be able to recover any closing costs and fees within 24 months.

Homeowners also refinance their mortgages so that they can shorten the length of the loan, and pay it off sooner. Refinancing a mortgage into a smaller interest rate, and a shorter loan length is the best way to maximize savings when refinancing a mortgage. The amount of interest saved throughout the course of the loan can easily add up to a lot of money. The equity you build in your home will grow much quicker, and you will be able to pay off the loan sooner than anticipated.

Yet another option for homeowners wanting to refinance is a cash out refinancing. This is when a homeowner borrows against the equity they have in their home. Typically, a cash out mortgage refinancing gives a homeowner a lot of cash in their pocket which is less taxed, or tax deductible and a better option than a loan. Most of the time, the interest rates on a cash out refinancing are much better than a traditional loan. However, while this may be good for some homeowners, always remember that all the money needs to be paid back. This could extend your loan, or make your monthly payments higher.

Homeowners should carefully weigh out all the benefits and disadvantages of refinancing prior to doing anything.

-M Petrone

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