When you refinance your home, your bank or mortgage company refinances your existing mortgage by taking over the old loan and paying it off with the new loan; the result is a refinanced loan.
1. What Does It Mean To Refinance Your Mortgage
Most borrowers refinance to either lower their monthly payment and term or to turn some of their home’s equity into more cash – either to pay down their debt and reduce their debt-to-income ratio or simply to get a better return on their investment.
Whatever the motivation, it is important to understand that refinancing your home can be a good thing. Refinancing allows you to take advantage of low-interest rates, longer loan terms, and other benefits such as insurance premiums that you may not be able to qualify for if you were to apply for a new home loan. However, before you decide to refinance, you need to be aware of the basic meaning of the word.
Refinancing refers to the process of changing the existing terms of your loan. Your new lender will pay off your existing mortgage and, in turn, your new lender will take on your mortgage at a different rate or different terms.
2. Pros And Cons Of Refinancing Your Home
When you refinance your home, you replace your current mortgage with another one. This new loan comes with a new interest rate, a new monthly payment, and maybe even a longer-term. Refinancing is often a good way to lower your monthly mortgage payment, but it is not for everyone.
The pros and cons associated with refinancing your home will more than likely depend on the type of mortgage you choose and the term of the new loan. If you choose a fixed-rate mortgage that locks in at a certain interest rate and does not fluctuate, then there are few pros to refinancing. The only con associated with refinancing would be that if rates suddenly go up, then you will end up paying more. However, if you can lock in at a low rate and only increase it by a small amount, then it will not affect your wallet too much.
Homeowners who want to take advantage of lower interest rates will find that a shorter-term loan is more useful. For example, a homeowner who wants to purchase a home that they plan on living in for a couple of years might be better served by a cash-out mortgage refinance. If the homeowner already has a decent savings account, then they may wish to use the money saved on the refinance loan to get a lower interest rate on their new loan. A homeowner who wants to save as much money as possible when they refinance will find that a no-money-down loan is their best option. This type of loan will allow them to focus on getting their new home rather than worry about putting money toward their savings.
3. How To Save Money Around The House
The easiest way to save on your house expenses is to create a budget to track all expenses, and then carefully audit your expenditures against that budget to look for ways to save. Even small savings that you can eek out each month add up quickly on a yearly basis.
A great example of such savings possibilities is your utility bills. One of the best ways to save money around the house is to be mindful of energy use and practice efficiency and conservation – by turning off lights when you leave a room, utilizing blinds when it’s hot, only washing full loads you could save a significant amount on your PECO energy bill.
Shopping carefully for home supplies Online stores are an excellent way to save money. By opening an account with an online store, you can earn discounts on everything from household goods to automobiles. Some online stores will also allow you to purchase items and then the shipping is done for you. This way, you will not have to pay out a lot of money towards shipping, which can add up to significant savings when purchasing household items, furniture, or automobiles.
You should establish a savings account specifically for unexpected large expenditures, and make that a part of your monthly budget. In the alternative, or maybe, in addition, you can look at purchasing a home warranty that covers all major systems and appliances in your home. For around $100 per month, or even less, you can rest assured that none of your appliances or major systems such as heating/AC can fail and leave you strapped to come up with thousands of dollars without warning.