Three Reasons to Consider Refinancing Home Mortgages

There are many reasons why people consider refinancing home mortgages, ranging from wanting to withdraw their cash in equity to reducing their interest rate to paying off credit card balances to lowering their payments. Some reasons are wise while others are not. Everyone has to review their own situation and decide what is best. But here are three good reasons when it would be "wise."

To Get A Better Fixed Interest Rate

Home Refinance Rates

When people are ready to buy a house, they have to accept the interest rates that are available at the time. However, as time goes by, it may be possible to get a better interest rate. There is more than one reason why a substantially lower rate may now be available.

If bad credit was a problem when the loan was issued but the credit history has now improved, then refinancing home mortgages would definitely be a wise decision. A bankruptcy in the past or simply poor payment history is enough to cause potential homebuyers to only qualify for a bad credit mortgage. But with consistent effort to turn things around, credit histories can go from bad to good, thus qualifying for a lower interest rate.

To Stabilize Payments

Many people, especially first-time homebuyers, will often take an adjustable rate mortgage because the payments are initially lower. A good loan officer will give the pros and cons of such a loan, warning the homebuyers of potentially increasing mortgage payments.

Unfortunately, not all loan officers take the time to do this ... and not all homebuyers care to listen to potentially bad news. But then, as interest rates rise, they find themselves having trouble making payments. Once in this position, homebuyers are wise to consider refinancing home mortgages in order to lock their monthly payments in so that they are not shocked every time their payment increases.

To Reduce Your Monthly Payments

Sometimes situations change and there's nothing that can be done about it. This could be the result of a divorce, a job change, a death of an income-earner, a serious illness in the family, or any number of other life-changing events. When something like this happens, many times mortgage payments are difficult to meet and refinancing home mortgages is necessary to prevent losing the home. This is a situation where it would be wise to refinance instead of letting things get out of control.

Generally speaking, the goal is to always be getting closer to getting out of debt. So if refinancing home mortgages is going to get homebuyers closer to that goal, then it is a good thing. Some people will refinance simply because the money (equity) is there and they want it. If that is the reason for refinancing, then refinancing home mortgages would definitely not be a wise decision.

Three Reasons to Consider Refinancing Home Mortgages