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You have read the headlines and heard all about the problems with the housing industry and the world of finance and yet you still see all of the offers for excellent home mortgage refinancing. “I should really look into that” you might say to yourself, but haven’t gotten around to it yet.
In order to understand the importance of home mortgage refinancing it is also important to understand your own financial needs. Perhaps you have owned your home for a decade and have another twenty years of payments left. You know that your interest rate is around seven percent and think that home mortgage refinancing to get that down to a five percent rate won’t make a big deal. Over the next twenty years however the amount of interest paid out would be quite different. Let’s say you have a loan for $250k at 7% for 20 years, which makes total payments of $465k. The same original amount at 5% for 20 years results in total payments of $396k. This means that a refinancing would save almost $70k for the borrower.
Clearly there is good cause to consider refinancing of a first mortgage, but there are also home mortgage refinancing options for other scenarios as well. Consider homeowners who had a first mortgage and then took out second mortgage to make improvements, pay for their children’s educations or for other larger expenses. They are now carrying two significant payments each month, and by consolidating them into a single refinanced loan would be able to reduce the term, interest rate or both.
Can a homeowner consolidate other debts into their home mortgage refinancing package? Absolutely! There are millions of people who decide to roll student loans and credit card debt into their refinanced mortgage. While some might argue that this extends the payments across fifteen, twenty or even thirty years, the facts also demonstrate that the average card holder paying their “minimums” would take over thirty-two years to pay a large balance on a standard credit card. Additionally, the homeowner who eliminates such monthly expenses has freed up cash to do such things as invest or save for retirement. If a borrower is very worried about this added debt they could still consolidate it into their mortgage and still make the same payments as they did against the credit account. In this way they could reduce the principle of the new loan and pay it off quickly.
Clearly home mortgage refinancing is all about options. A borrower has many choices and it is wise to investigate them all before making a final decision.