Four Reasons Homeowners Choose to Refinance

Four Reasons Homeowners Choose to Refinance

Financing a home by obtaining a mortgage loan is by far the most common way to enable a purchase. Consumers often find that it makes just as much sense to refinance later on, however, even when they were initially satisfied with their arrangements.

A post published at dustindimisaconnect.com details some of the most common reasons homeowners have for refinancing existing loans or taking out second mortgages. As the founder of one of the fastest-growing mortgage brokerages in the country, the author has some interesting things to say.

Many Reasons to Consider a New Home Loan

Shopping around for the best available mortgage is a well-established part of buying a home. More and more often, though, consumers find that it makes just as much sense to look into additional, related options later on.

The reasons homeowners have for refinancing their mortgages or taking out home equity loans are quite varied. Some of those that the CEO of InterContinental Capital Group identified in the course of personally taking to customers were:

  • Debt consolidation. Once a homeowner has built up some equity in a home, it can make sense to leverage that asset to pay down other types of debt. Credit cards, for instance, typically carry interest rates that are multiples of those typical of collateral-backed loans like mortgages. Refinancing to consolidate debts can significantly reduce the monthly financial burden on a household. Over time, that will often mean saving many thousands of dollars, especially when mortgage interest rates are low.
  • Home improvements. Even homeowners who are initially ecstatic about their purchases often discover things that could be improved later. Funding improvements by refinancing or taking out a home equity loan can even add significant amounts of market value to a house. There will often be no more economical, affordable way to fund major projects, even for those with cash to spare. Homeowners often feel more comfortable with this type of borrowing because it aligns the collateral with the intended purpose of the proceeds.
  • Term reduction. Thirty-year mortgages have become the norm in many markets, but homeowners often find their needs and situations evolving somewhere along the way. Refinancing a home to reduce the term of the associated note can end up being a practical, appealing option. That can eliminate early repayment penalties while improving on the status quo in other ways.
  • Mortgage insurance elimination. Private mortgage insurance (PMI) requirements add significantly to the monthly payments of many loans. Being able to refinance so that this type of coverage is no longer required can make it a lot easier to keep a household’s budget balanced. While it will not always be possible to do away with PMI before building significant amounts of equity, consulting a knowledgeable broker should yield a reliable answer in any case.

Refinancing Regularly Makes Sense

Consumers who seek to refinance their home loans or take out second mortgages quite often cite reasons like these. There are a number of other common reasons for looking into refinancing or similar options, any of which could make excellent sense in certain situations.

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