Most people will never purchase more than one or two houses in their lives and financing seems like a complicated issue best avoided. So when it’s a good time to refinance, many people simply choose to stay the course with their current loan. Sometimes, sticking with a plan is the best choice. But there are some legitimate reasons to consider a refinance loan.
Refinance loans are a good way to pay off other debt. Consider the person who has accrued significant equity in their home, but has auto loans and credit card debt with high interest rates. If the house loan market is offering good interest rates, it could be an opportune time to refinance the house, paying off some lesser loans. If you consider the amount of money you’ll be saving from the higher interest rate alone, you might find yourself anxious to wade through the paperwork involved in a refinance loan.
Refinance loans are also a way to get better loan terms. If you’ve taken out a house loan at a time when interest rates were high and payoff details less than ideal, you might find the lender willing to offer better terms after you’ve paid on the loan for a period of time. Especially if your credit rating was poor at the time you took out the original loan, diligent payments could have improved your credit score.
Sometimes, refinance loans will have lower payments than the original loan amount. But you might also choose to refinance with a shorter payoff date and higher payments. As you prepare to refinance, consider you options and be sure the new plan is going to improve your financial condition.
