Many homeowners are confused, intimidated, or convinced they wont get approved, when considering a mortgage refinancing. However, especially these days, the process, is easier, and more available than ever before. There are many good reasons to refinance a mortgage. Here are some of the most popular ones.

Changing Loan Types
Many homeowners are stuck in an adjusted rate mortgage and would benefit from a stable fixed rate home loan. A few years ago, when the housing market was skyrocketing, many homeowners got themselves into an ARM loan convinced their home would increase in value, and they could easily refinance later. Many lenders and banks took the chance and gave loans which people could barely afford, betting the home would rise in value. However, that did not happen. Instead, the housing market tanked, and left many homeowners with a home that actually dropped in value since it was purchased. Worse yet, ARM rates have most likely increased at the same time, meaning you are paying even more money every month for a home that is losing value.

Instead, many homeowners look to refinancing just to change loan types. While many ARM loans have low introductory interest rates, they are only temporary. A fixed rate mortgage offers long term stability, and a mortgage payment that never changes. Refinancing a mortgage is a welcome relief, and a big source of savings to many homeowners who have seen their home loan payments increase by 50% or more with their adjusted rate mortgage.

Getting a Better Interest Rate, a Lower Monthly Payment, or Both
When interest rates are as low as they are right now, and have been all year, many homeowners want to refinance a mortgage to take advantage. This can also lower the monthly payments that a homeowner owes. Some people benefit even more by actually reducing the number of years on their home loan, and only slightly increasing their monthly mortgage payment. This is all possible through refinancing into a lower interest rate. If you were to get a home refinanced into a better rate, but keep the same length on the loan, your payments would be lower every month for the home loan duration. If you refinance into a lower rate, and decrease your mortgage length, your payments may only slightly rise, and you will save huge in the longer run. Both of these options though are great decisions and main driving forces on refinancing applications.

Cash Back Mortgage Refinance
A lot of people tap into their homes equity and use it as a large loan. This is also known as a cash back refinance, or home equity loan. This is when a homeowner refinances a mortgage for more than they actually owe, and pockets the difference.

As an example, say a homeowner owes $75,000 over the next 10 years on their mortgage. They would then refinance into a $100,000 loan over 15 years (Or whatever length they want), and pocket the $25,000 difference. This is a great way for a homeowner to quickly gather a large amount of low interest money without taking a personal loan or second mortgage. While this money can be used however the homeowners wishes, it is always advised to think long term and have a plan for the money you get back. Many homeowners use the money to pay for home improvements, repairs or upgrades. Another popular option for them money is to use it to pay down other debts and take care of financial problems. Whatever the reason, if you have a decent amount of equity in your home, you can probably get a cash back refinancing option.

These are some great, and popular, reasons people refinance a mortgage.

-M Petrone

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