Refinance Home Loan: Reasons for Refinancing Your Home Loan

There are a number of reasons for refinancing your home loan regardless of your financial situation or the economy. Refinancing can help you lower your monthly payment amount, qualify for better terms or interest rates, even build equity in your home at a faster rate. Here are three common reasons for refinancing your mortgage and the advantages that go along with themI. Consolidate Your BillsOne of the best reasons for refinancing your mortgage is to cash out equity in your home for the purpose of consolidating your higher interest debts. The advantage of refinancing over using other types of equity loans is that you will be left with one monthly payment and a lower interest rate. When you refinance your existing mortgage and take cash back you are actually borrowing more with the new loan than you owe on your existing mortgage. The difference between the old mortgage and your new loan will be paid to you at closing; this is the money you will use to pay off your bills.II. Lower Your Monthly Mortgage PaymentMany homeowners refinance their home loans because they need a lower monthly payment amount. There are two ways to lower your monthly payment when refinancing. You can qualify for a lower interest rate and extend the term of your new mortgage. The term length of a mortgage is the amount of time the lender grants you to repay the loan. The most common term length is thirty years; however, there are now forty and fifty year mortgage terms available. If you do not qualify for a lower interest rate you can still lower your payment amount by choosing a home loan with a longer term length.III. Build Equity in Your Home FasterMany homeowners refinance their home loans to build equity in their homes at a faster rate. By shortening the term length of the new mortgage loan, your new mortgage payment will go up and you will build equity in your home faster. Common term lengths for homeowners refinancing for this reason are 10 to 15 years. You can learn more about your home loan options and common mistakes to avoid when refinancing by registering for a free mortgage guidebook.