Mortgage Refinancing in Carroll County
Refinancing an existing mortgage is a great idea when interest rates decrease, your credit score improves, or you would like to change to a different mortgage type, i.e. from an ARM to a fixed rate mortgage. It is imperative that you remember that by refinancing you are paying off your existing mortgage and taking out a new mortgage. The process, procedures, and costs for a refinancing are nearly identical to those for an initial mortgage.
When the interest rates on mortgages are decreasing it is a good idea to consider refinancing as you may be able to save a lot of money as the interest rate is directly tied to how much you pay each month. A half a percentage point decrease on a $200,000 loan could save you about $750 dollars a year. The interest rate may decrease generally at the market level or you may be able to lower your interest rate due to an improvement in your credit score. Either way you should consider refinancing your mortgage.
Additionally, you may wish to decrease or increase the length of time for payment of your mortgage. An individual may choose to increase the term for their mortgage if you would like to reduce the amount he/she is to pay each month. Be aware though that if you choose to increase the payment term you will ultimately pay more in interest costs over the life of the loan. Conversely, if you choose to decrease the term of the mortgage you will pay less in interest over the course of the loan, but you will pay more per month.
Switching the mortgage structure from an ARM to a fixed rate mortgage is another common and beneficial reason for refinancing. If you have an ARM, you monthly payments could change as the interest rate changes. You may wish to have the stability of a fixed rate mortgage or you may want to take advantage of the low interest rates while they last by locking the interest rate in. You may also be able to refinance with an ARM with preferable terms, which means that the loan may start out at a lower interest rate, smaller interest rate adjustments or lower payment caps.
An individual may refinance to get cash out from the equity he or she may have built up in their home. Equity is the difference in dollars between the balance on the mortgage and the value of the property. By refinancing for an amount greater than what you owe on the mortgage, you can receive the difference in cash payment, also known as a cash-out refinancing. The cash payment may be used for home repair/improvement cost or to help pay for your children’s education. However, remember that when you take the cash payment/equity out of our home you own less of the home and you will not receive as much should you sell your home.
Refinancing your current mortgage loan could result in the total finance charge to be higher over the life of the loan.