If you are considering taking out a new mortgage, there are decisions you need to make before choosing a new mortgage loan. One important question you need to answer before refinancing your mortgage is the reason you are choosing to do this.
There are a number of reasons homeowners choose to refinance their mortgage loans, and you can refinance for these reasons in any economy. These reasons include: qualifying for a better interest rate, cashing out equity in your home, and consolidating your debts.
Refinance to Lower Your Interest Rate
If your goal is to qualify for a better interest rate than your existing mortgage you can do this when interest rates go down or your financial situation improves. There are a variety of mortgage lenders that will work with to qualify for better rates, especially if you have good credit. The Internet is an excellent tool to help you search for mortgage lenders that meet your particular needs.
Refinance to Cash out Equity
Refinancing your current mortgage can give you access to equity you have in your home. When you refinance a mortgage to take out equity, you borrow more than the outstanding mortgage loan. The difference between your old mortgage and the new mortgage is what you will receive in cash.
Consolidate Your Bills
When you refinance your mortgage and take cash back, you can use this money to pay off your other high interest debt. If you carry a large amount of credit card debt you could save yourself a lot of money by consolidating this debt with equity from your home and gain a tax deduction for the interest you pay. You can learn more about your mortgage options, including common homeowner mistakes to avoid by registering for our free mortgage guidebook: “Mortgage Refinancing: What You Need to Know.”