Reducing consumer debts will ease anxiety and open the door for better
rates on a home loan or mortgage. Unfortunately, becoming debt-free is
a long process, and it may take several years to achieve this goal. If
you own a home, refinancing your existing mortgage even with poor
credit may present extra cash to payoff high interest credit cards.
What Does it Mean to Refinance a Home Mortgage?
Refinancing a home loan is an everyday practice. There are several
reasons to contemplate a refinancing. For starters, if you attain a
cash-out refinancing, the mortgage company will hand over a lump sum of money
at closing. Prior to this, homeowners apply for a new home loan, which
replaces the old. In addition to creating a new mortgage, homeowners
also borrow money from their home's equity. For example, refinancing an
existing $125,000 mortgage, and borrowing $25,000 of the home's equity
will produce a new mortgage of $150,000.
Advantages of Refinancing an Existing Mortgage
If your intent is to become debt-free in the shortest amount of time,
refinancing your home is a great alternative. High interest credit cards
are difficult to eliminate. Unless you are able to make large payments,
it may take ten to twenty years to payoff a $2,000 credit card balance.
Moreover, a new mortgage is great for acquiring funds to make home
improvements, build a savings account, or plan for retirement. Homeowners
with poor credit may increase their credit rating upon reducing or
eliminating consumer debts.
When is the Best Time to Refinance?
For many homeowners, now is a good time to refinance their current
mortgage. Individuals who obtained home mortgages before rates began to
decline are likely paying two or three percentage points above the current
average. Refinancing for a lower rate may decrease your mortgage
payment. Moreover, refinancing may eliminate private mortgage insurance.
With low mortgage rates, refinancing for a fixed rate or interest-only
option may be favorable. Before refinancing, count the costs. Remember,
refinancing will entail paying closing costs. If the monthly savings
are insignificant, or you plan on moving in less than five years, you
will not benefit from a refi loan.
View our recommended
Bad Credit Mortgage Refinance lenders or view all of our Recommended Refinance Lenders.