Refinancing a mortgage is a practice that people perform when they are getting a lower interest rate on their existing loans. Ideally, a mortgage should be refinanced when the difference between the old and new interest rate is 2%. However, many lenders believe that 1% is good enough for people to go for refinancing. Let’s get into the details of when you should refinance your mortgage.
Let’s say you own a house and want to renovate it to increase its value and improve the quality of life for your family. It could be updating your kitchen, fixing a pipe leak, or finishing the basement.
Now suppose that you have invested a significant amount of money in different investments that you would rather not touch, then you will have to opt for refinancing your mortgage to get some money in your hand to spend on other essential products and services. You should free up some funds to pay for your children’s tuition fees, home renovations, and other expenses.
Essentially, mortgage refinancing allows you to use the equity you have accumulated in your property to free up cash. This cash can be used for almost anything: renovations or other major expenses, such as buying a car, paying tuition fees for post-secondary studies, or starting a business. In certain cases, people can use the equity accumulated through mortgage refinancing to pay off high-interest debts, including credit card debts.
The process of refinancing your home is rather simple; in fact, the demand is similar to that for a mortgage.
How much can you get?
The current rule allows homeowners to borrow up to 80 percent of the appraised value of their house. But, people have to consider how much of the mortgage has been paid off. Basically, the more principal you have paid back on your mortgage, the higher the amount you will have access to when refinancing.
Suppose your home is worth $500,000 and you have been paying off your mortgage for the past few years. The amount left for you to pay is $100,000.
In such a scenario, 80% of the total value of your house is going to be $400,000. Since you still have $100,000 to repay, you have access to a net worth of approximately $300,000.
Refinancing a mortgage is a smart move only when you know that you are getting a significant reduction in the loan value. If you are not able to decide when to refinance your mortgage, then you should take the help of experts. In Las Vegas, the PIF Lending helps people select the right time for getting a home mortgage and other procedures related to it. So, you must get in touch with PIF Lending to get the most accurate information on when you should refinance your mortgage.