How can refinancing your home be beneficial?

Answer 1

1) People being people, they sometimes think they've got a better use for money than tied up in the equity of the house, so they take a "Cash out" loan and use some of that money for other purposes. Sometimes the other purpose is a good one, sometimes not so much.

2) If you can qualify for a better interest rate without paying too much in costs, it's a good idea to refinance. Rates are higher today than they've been for a while, but if you had a 500 credit score and had to do a stated income loan a couple years ago, but now your credit score is 750 and you can prove you make plenty of money, odds are good you can get a better rate by refinancing. Maybe your equity has increased, making it a less risky loan for the lender, meaning you can now get a better rate. All kinds of reasons why you might get a lower rate now.

Two things to watch out for: First: All of those forms and figures you get at the beginning of the loan process mean nothing more than a loan officer wants them to mean. The only papers that mean anything are the ones you sign at the end of the process. Second: There is always a tradeoff between rate of a loan and cost to get that loan. Higher costs=lower rates, lower costs=higher rates.

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Answer 2

The idea is that if you have equity built up in your home, you can take out a loan against it. Or if you're having cash flow issues, you can restructure the loan so that for example, your monthly payment drops but the length of the loan increases.

The idea is that yes, you will be paying some amount of interest on the loan, but you feel that you can get a better rate by investing that money somewhere else (or use it to pay off higher interest debts). A lot of people refer to this as using other people's money to invest.

Example:
Rate on house loan 6%
Expected return on investment 8%

If you could pull 100k from your home equity and invest in this opportunity, should you? If you don't mind racking up the debt, the answer is yes because you will pay 6k in interest, but you will earn 8k from the investment. Congratulations, you just made $2,000. Of course, there would be an issue if the value of your home drops enough so that the house is worth less than what you owe on it, or if the investment doesn't return what you expect. But hey, you're not supposed to be able to earn higher reuturns without increasing your risk.

Answer 3

Number of ways to be benefical:

1) If you financed 100% on a 80/20 loan you and you house has enough equity built to cover the 20% you can refiance to cover the 2nd and make one payment instead of two
1a) When you refinance its called rate/term. Well if you have some extra cash left over you can buy down your rate with the equity in your home giving you a lower payment. This is great especially if you still want the mid 5's.
2) You can use the equity and do a cash out refinance to upgrade the home so next time it gets appraised you can get a better appraisal value on your home.
3) You can cash out refinance and take a vacation, upgrade the wife's ring, buy a Hummer or Mercedes.

Couple of good reasons that its benefical to refinance

Answer 4

If you have a number of different debts (say a personal load, a credit card etc), if the interest rate of the home load was less than that of the other debts, if they are consolidated you would pay less interest.

This however would have to be worked out over the term of the loan.

You need to do your homework because every situation is different.

You may also want to chase a cheaper interest rate but make sure that entry and exit fees don't eat away any saving you think you might get.

If you are going to a fixed rate as opposed to a variable rate it's good if variable rates increase but you loose if the variable rate drops.

Tough one.

Answer 5

There's 4 reasons to refinance your home:

Debt consolidation - your mortgage payment may go up a little, but your OTHER bills are paid, so you spend less per month

Lower your rate - pay less per month on mortgage itself

Change term - alter the length of the loan to better suit your financial situation (less years = higher payment)

Cash out - take money out of the equity in your home and do what you want with it (I recommend investing for a higher return than your mortgage APR)

If you'd like to know more about your options e-mail me at [e-mail]

Answer 6

if u got finance at a very high rate of interest