There are many of benefits which are associated with re-financing a home. While there are many situations where re-financing is not the right decision, there are a host of benefits which can be gained from re-financing under favorable conditions. It is now even possible to get a home loan refinance with the aid of the government. Harp 2.0 or the Obama refinance program are specifically built with home owners in mind who face financial difficulties to re pay their mortgage. Some of these benefits are obvious: they include lower monthly bills, debt consolidation and the ability to utilize the existing equity in the home. Homeowners who are considering re-financing should consider each of these options with their current financial situation to discover whether or not they wish to re-finance their home. Here are the main advantages..
Lower Monthly Installments
For several homeowners the possibility to lower their monthly bills is a very appealing benefit of re-financing. Many householders live paycheck to paycheck and for these homeowners finding a way to increase their savings can be a monumental feat. Everyone who is able to negotiate lower interest rates when they re-finance their residence will likely begin to see the benefit of lower monthly home loan payments resulting from the decision to re-finance.
Every month homeowners submit a mortgage loan payment. This payment is normally used to repay a portion of the interest as well as a part of the principle on the loan. Everyone who is able to refinance their loan at a lower interest rate may see a decrease in the amount they are paying in both interest and principle. This may be due to the lower rate of interest along with the lower remaining balance. When a home is re-financed, a second mortgage is taken out to repay the first mortgage. If the existing mortgage was already a few years old, it is likely the homeowner already had some equity and had repaid some of the previous principle balance. This enables the homeowner to obtain a reduced mortgage when they re-finance their home because they are repaying a smaller debt than the original purchase price of the property.
Debt Consolidation Loans
Some homeowners commence to investigate re-financing when considering debt consolidation. This is especially true for homeowners who have high interest debts such as bank card debts. A debt consolidation loan enables the homeowner to use the actual equity in their home as collateral to secure a low interest loan which is large enough to settle the present balance on the home as well as a number of other debts such as credit card debt, car loans, student loans or any other debts the homeowner may have. When re-financing is done of the reason for debt consolidation there is not always an overall increase in savings. Those people who are seeking to consolidate their debts are often struggling with their monthly payments and are seeking an option which makes it easier for the property owner to manage their regular bills.
In addition, consolidating debts can also simplify the entire process of paying regular bills. Homeowners who are apprehensive about participating in monthly bill pay programs may be overwhelmed by the amount of bills they must pay every month. Even if the value of these bills is not worrisome just the act of writing several checks each month and ensuring they are sent, on time, to the correct location can be overwhelming. For this reason, homeowners often re-finance their mortgage to minimize the amount of payments they are making each month.
Making use of the Existing Equity in your home
Another popular reason behind re-financing is to use the actual equity in the house. Homeowners who have a great deal of equity in their home may find they are able to spend some of this equity for other purposes. This may include making improvements to the home, starting a business, taking a perfect vacation or pursuing a higher level of education. The homeowner is not limited in how they can use the equity in their home and may re-finance a home equity line of credit which may be used for any purpose imaginable. A home equity line of credit is different from a loan because the funds are not disbursed all at once. Rather the money is made available to the homeowner and the homeowner can withdraw these finds at any time during the draw period.
Do you need a refinance? It is possible with the help of the federal government! Visit this site to discover if you are eligible for the Harp 2 program.