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Refinancing Your Mortgage26 Dec

Many lenders receive tons of mortgage refinancing application whenever there is a significant drop in the mortgage rates. This is how mortgage refinancing works: the borrower will apply for a new mortgage with new terms to pay-off his current mortgage. The new mortgage will most likely have a lower interest which is a better deal for the home buyers.

There are so many reasons why a homeowner applies for mortgage refinancing. One of the most obvious reasons is that they are desperate of getting a cash to pay for the high mortgage interest. Or they just want to replace their current loan with a term that suits their financial situation at present.

But it doesn’t mean that mortgage refinancing has no major draws. In fact, it can also possess some irreversible risks that can be too costly to bear. Be familiar with the pros and cons of refinancing before deciding if you really need it or not.

  1.    Lower Interest Rate

Having a Washington DC Luxury Real Estate mortgage with lower interest is always a better deal. There might be a case wherein you cannot qualify for a lower interest when you initially applied for a mortgage. When your financial standing become well and you are qualified for a mortgage with good deals, you can apply for mortgage refinancing. By doing this you can save thousands of dollars from paying the mortgage interest in the long run.

  1.    Convert an adjustable rate mortgage to a fixed rate or vice versa

When you applied for a mortgage, you got so into the adjustable rate mortgage (ARM) because during that time the interest is low. It continues to be so for a few years before it rises. Then you realized that you are losing money because you are paying more when the interest rate rises. When this happens, you can apply for mortgage refinancing to switch your term into a fixed rate mortgage. If you are on a fixed rate mortgage, analyze very well if the ARM is a better option.

  1.    Cash Out Your Equity

Equity is the difference between the value of your Potomac property less the mortgage that you still owe to the lender. Selling your house is one way to use the equity. But if you have no plan to move, another option is to cash-out refinance. What you can do is to borrow against your equity and appropriate it in your house’s current principal balance. You can use the additional cash to pay off your debt or start a new business.