Refinance
There are basically three reasons why a homeowner would want to refinance.
One, to get a lower interest rate, thus lowering his payments. In the past 5 years, most homeowners have refinanced at least once. Some have refinanced multiple times. Simple calculations will tell you whether or not you will save money by refinancing. Don’t forget to add in all the costs.
Two, to get cash out. Most lenders will lend up to 80% of the value of your house. You can get 100% cash out financing, but the interest rate is very high. The advantage of using the cash from the equity from your house rather than using your credit card is the tax advantages of deductible interest, as well as lower interest rates. However, the down side is, if you do not make your mortgage payment, you can lose your house. Not making your credit card payment cannot put your house in foreclosure.
Three, to change the term of the loan. You may have a 30-year loan, and decide you want to pay off the loan faster by refinancing to a 15-year loan. Or vice versa, you may refinance from a 15- to a 30-year loan in order to lower your monthly payments. You might also have a balloon payment due on your loan. You pay off the holder of that note by refinancing to a new loan. For example, some people have a 30 due in 5 type of loan which was very popular. This means the loan payments are calculated based on a 30-year amortization, but the loan is all due at the end of 5 years. Unless you won the lottery, most people would not have enough money at the end of 5 years to pay off the entire loan. So you pay off that balloon payment by refinancing.
Or it may be a combination of these three reasons that a homeowner chooses to refinance. If you are in any one of these situations, refinance now before rates go up any higher.