As a homeowner, you may be aware that it’s possible to refinance your mortgage but don’t know whether you are eligible or whether this would be helpful to you. There are mainly two types of refinancing that you should know about. The first method would be to save money, and this would be a refinancing of the rate and term of your mortgage. In this situation, you would typically refinance the remaining balance of your mortgage at a lower interest rate and for a negotiated number of years (the term) over which you’ll repay the loan. The second option would be cash-out refinancing. Here, you would take out a new mortgage for more than you owed, generally based on a re-evaluation of the value of your home. You would be able to take out the difference in cash which could be used if you needed to pay off an existing debt. There are other reasons that people refinance, and this could be that they have an adjustable-rate mortgage and they wish to replace this with a fixed-rate loan. What also sometimes occurs is that a couple is divorcing, and one needs to raise cash to pay the other party out for their share of the house.
Deciding whether to refinance your Knoxville home mortgage
To close an existing mortgage can cost a lot of money, so you need to do careful calculations to decide whether this is right for you. You would probably start by calculating a break-even point, as this would at least ensure that you wouldn’t lose money on the deal. If you would break even within a year, but are planning to sell your home during this time, it wouldn’t make sense to refinance, and you should probably stay in your current mortgage.
A refinance could actually cost you money in the long-run if you start a new loan with a long term. Mortgages are usually for a term of fifteen or thirty years, so if you refinanced for a new mortgage of thirty years, you certainly wouldn’t be saving money on interest charges. As this can be a complex issue and as you may not have the knowledge and ability work through the figures and make decisions on your own, this is when it’s important to have expert advice. You can find more information by contacting a local bank. Community Banks typically have highly trained staff who will be able to assist you by looking at your specific situation and advising accordingly.
