Would you refinance your property loans?
Would you refinance your property loans to help you manage your investment portfolio? When used under the right circumstances, it can be a substantially good form of leverage for growth and capital gain.
Here are some things to consider about refinancing your mortgage.
When you refinance your property, essentially you take out a new loan to pay off your original mortgage. Refinancing allows you to borrow against the equity you have built up in your home and take out cash you can use to pay off other debt, make home improvements, or invest in your retirement.
For example, let’s say you have $70,000 of equity in your home, but still owe $175,000 on your mortgage. You may take out a new mortgage for $200,000 that is used to pay off the first mortgage, and then pays you $25,000 in cash. If you have made regular payments on your initial mortgage for at least five years, you probably have enough equity built up to take a cash-out mortgage.
Refinance your property loans for budget flexibility
Another reason to refinance is to reduce your monthly payment, which gives you more flexibility in your monthly budget. When you refinance, you are basically starting over on your 30-year commitment. However, if you are not taking cash out, your new mortgage amount will be lower, so your payments decrease.
If you originally took out a 15-year mortgage, changing to a 30-year term will lower your monthly payment considerably.
You may also choose the opposite and switch from a 30-year loan to a 15-year term. Your monthly payments will likely increase, but you will pay your loan off earlier and pay less interest.
Rejuvenate your lending rate when you refinance your property loans
Another reason to refinance is to change from a variable to a fixed mortgage rate. This eliminates fluctuations in your monthly mortgage payment and may help you take advantage of favorable rates.
Before you decide to refinance, do some homework. You should perform an audit of your monthly budget so you know precisely where you stand. You can assess your short and long-term financial goals, check your credit score, watch interest rate fluctuations, and consider the costs involved in refinancing your new loan.
Your home mortgage is an important investment in your future, and a mortgage refinance can be a smart move to help you manage your investments when used under the right circumstances. Here are some things to consider about refinancing your mortgage.