Refinance Your Mortgage to Pay Off Debt Faster

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Refinance to Pay Off Debt

 
When you refinance a mortgage, one of the benefits is the ability to pay off unwanted debt, an option many home owners have at their fingertips. When unexpected expenses inevitably arise, there is a way to manage them by taking advantage of the equity in your home, something many fail to see as an option. For most people, your home is the largest investment you will ever make. Refinancing can offer you the opportunity to reduce monthly payments, ultimately putting more money in your pocket to pay for unforeseen and past expenses.
 

What is Refinancing?

 
Maybe you are new to the whole mortgage world and don't have a good grasp of what refinancing means. In the simplest of terms, refinancing is when someone takes on a new mortgage to replace the existing one. Why do this? There are a few reasons people do this, including: decreasing the time it takes to pay off an existing mortgage, lower interest rates, or extending the length of their initial mortgage in order to have lower monthly payments. This can be specifically beneficial to those who want to lessen their current financial constraints and require some flexibility. Refinancing allows the home owner to achieve different and often better interest rates and terms, allowing them to save money over time.
 

When Refinancing is the Best Choice for Paying off Old Debt

 
Whatever life throws at you, a leaky roof, hefty credit card bills, past student loan debt, or a baby on the way, there is one way most people can pay off unwanted debt. The main advantage of refinancing of course, despite the current equity state of your home, is to obtain a lower interest rate that will be beneficial to the home owner in the long run. Additionally, this will reduce your monthly payments, creating a more flexible monthly budget. Typically, as you work more and increase your credit score, you are privy to certain lower interest rate loans. It is this lower interest rate that can have a significant impact on the amount of monthly payments you make and thus assist in paying off old debt faster. Alternatively, many people refinance to obtain large sums of money for large purchases such as home renovations, a new car, or to pay past debts. In order to take advantage of this option, your home must be worth more than the sum of your mortgage loan. In other words, there must be an appraised additional value on your home exceeding what you owe on your loan.
 

Special Considerations

 
Most mortgage lenders and banks will require you to keep your existing mortgage for a minimum of 12 months. However, every lender is different and you should take the time to look into the details and restrictions of your current mortgage loan. Typically, home owners will refinance with the same lender because you will generally get a good rate, seeing as they want to keep you as a customer. However, this is not mandatory and you can shop around for alternate loans if they surpass your current options.
 
The bottom line: a viable option for most home owners is the choice to refinance a mortgage to pay off debt. You can reduce monthly payments or capitalize on the existing equity of your home, saving you money in the long run. 

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