More often than not people choose to refinance their mortgage to acquire a mortgage a lower rate, which could potentially save a lot of money. There are also many other reasons for doing so:
- A big reason is to consolidate your 1st and 2nd Mortgages
- Paying off high interest rate credit cards
- Pulling cash out for home improvements
- Paying off back taxes
Basically, any reason you can come up with.
What is the Cost to Refinance?
Refinancing involves paying off the existing mortgage, which may or may not have a pre-payment penalty. If this is the case you need to estimate 6 months of interest to your existing balance. Plus all of the additional closing costs. But you can minimize your closing costs with discount points.
Does the Cost Justify the Benefits?
Depending on your goals, you need to look at the time your break even, or your new monthly payments, and if you pulling cash out to pay bills which will help your financial status usually immediately.
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