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Why and when should I refinance?

By doing a refinance, you can turn your debt into equity, save thousands of dollars in interest, and get steadier home loan payments. In addition, the benefit of refinancing your mortgage to take advantage of today's low-interest rates is that it will allow more money on hand to be invested in the stock market and other ventures. So, in other words, it is wise to refinance if you will use the money to make a difference. Refinancing is not always a good idea. It could be that your credit score is not yet good enough. Or your income may not be sufficient enough to qualify for the new loan. Or, you may have trouble selling your current property if you need to repay collateral mortgages on other properties. However, if you have done all your homework, do not hesitate. There is nothing wrong with refinancing your home when the time is right.

Here are some reasons to refinance:

Lower interest rates. Fixed mortgages are much lower in interest rate than variable

mortgages. If you make larger down payments and have the equity to leverage, you can get a fixed-rate loan with relatively low monthly payments. You will also save thousands on interest and maintenance costs over the life of your mortgage because of the lower interest rates.

More cash flow for personal use or investment purposes. Your new mortgage lender will offer you a higher loan amount than your current one (allowing you to consolidate debts or purchase something larger and better). You can then use the extra cash flow from lower interest rates to invest, consolidate debt, or whatever.

Easier repayment schedule and lower monthly payments. You can opt for a 30-year

fixed-rate mortgage that offers lower monthly payments. This gives you flexibility and savings in the long run if your financial situation changes.

Reduce your risk of losing your home during a job loss or other temporary hardship. The loan terms could be extended so that this hardship won't put you at risk of foreclosure.

Protection against rising interest rates. If interest rates start rising, you will still be able

to refinance to save even more on interest rates. If your financial situation changes, you can then choose to repay the loan at a lower interest rate.

Easier home sale and down payment. Your house equity will allow you to sell your

house or put in a large down payment for another property. For those with a high debt-to-income ratio, many lenders now offer "teaser" rates for three years before changing the rate for good. You'll also want to factor in how far along you are in paying off your loan or if any equity is involved when deciding whether or not you should refinance. Of course, you'll have to consider the impact that refinancing could have on your credit score. For those who have missed mortgage payments, scoring could be affected negatively. If you are considering refinancing your home and saving money on your monthly mortgage payments, remember that the lender will do a full credit check to ensure the loan is safe and you have enough income to pay it back. They want to know that you can easily afford the new loan over the long term, and they don't want you taking on more debt than you can handle. You'll need to meet strict income requirements or provide proof of funds if they want to know where your money will come from.

Before applying for a refinance, be sure that you can handle the extra costs (such as

appraisal fees) associated with switching lenders. You'll also want to consider your personal situation, such as how far along you are in paying off the loan and if any equity is involved. You may also want to weigh the pros and cons of refinancing your home loan against other options for saving money, such as changing jobs or finding a cheaper place to live.

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