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5 Benefits of Refinancing an Existing Home Loan .pdf

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5 Benefits of Refinancing an Existing Home
Refinancing a mortgage is a process, wherein the borrower has the option to pay off
an existing home loan to obtain a new home loan with lower rate of interest, or opt
for a cash-out that can be used for personal or business needs. Many people often
get skeptical about refinancing a mortgage, thinking the process to be full of hassles
such as completing paperwork, paying a refinance fee and many others. Refinancing,
on the contrary, is a valuable proposition for the borrowers, if approached the right
way. That said, the blog post discusses five benefits of refinancing an existing home
loan. Take a look.

1. Lower Rate of Interest
Refinancing an existing home loan helps in lowering the monthly mortgage payments
as interest rates get lowered. The percentage drop in the interest rates depend on
the loan amount; however, you can expect a drop anywhere in the range of 0.75
percent to 1.5 percent. Though refinancing increases the life of the loan, but the
savings that come with lower interest rates make refinancing worth giving a shot.
2. Option to Cash Out Home Equity
The value of most homes increase with time, a factor that can be utilized for some
extra income. In refinancing, borrowers get a golden opportunity to cash in on a
significant portion of home equity and borrow an amount more than the initially

owed amount. Borrowers get the difference paid in cash, which can be used in
eliminating outstanding debts such as credit card bills or to fulfil other financial
3. Zero Private Mortgage Insurance
Most home loan choices in Texas or elsewhere in the US requires borrowers to pay a
Private Mortgage Insurance. The Private Mortgage Insurance protects the lenders in
many loan programs against a borrower default. As the borrower continues
mortgage payments for years, the balance on the home decreases and therefore,
borrowers can eventually stop their PMI payment by refinancing a mortgage. The
final authority to stop the PMI payments is the lender.
4. Loan Consolidation
Refinancing merges two loans to a single loan. Using a first and second lien loans to
purchase a home with a low down payment used to be a standard practice before.
Usually, the rate of interest on the primary mortgage or the first loan is much higher
than the second loan, however, this is not the case with refinancing. Consolidation of
loans, on the flipsyde, helps you to negotiate a lower rate of interest than having to
live with two or more separate loans.
5. Fixed-Rate Mortgage
Many borrowers go for an adjustable rate mortgage in the beginning to capitalize on
extremely low interest rates for a short period, such as 3 to 10 years. In reality, the
rate of interests on adjustable rate mortgages can fluctuate in the long run, causing
an overall increase in monthly mortgage payments. Though you can’t switch to
fixed-rate mortgage with a low interest rate in between, refinancing makes it
Wrapping Up
Most borrowers shy away from refinancing, thinking it to be an unnecessary hassle.
Though refinancing involves intricate paperwork along with a refinancing fee, the
upside makes the option. Before you think about refinancing, you must consider the
pros and cons or else it may do more harm than good. That said, you must consult a
professional mortgage company to help you refinance your existing loan.

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