Refinancing is often used to
lower your interest rate. If rates have dropped since
you last financed your home, you may want to consider
refinancing. Other common reasons to refinance include
paying off a balloon payment, converting an adjustable
rate loan to a fixed rate loan or to extract cash equity
in your home (cash out). A few reasons for cashing out
include: home improvement, an education fund, and consolidating
debt.
Another way to convert equity in your home to cash is
a “home equity” loan. A “home equity”
loan is an alternative to refinancing if your home loan
has a very low rate compared to current interest rates
or if you have a prepayment penalty on your loan.
In
order to refinance you will need a current appraisal,
analysis and in many cases verification of your income
and assets, as well as most of the same paperwork required
when you originally financed your home. Adequate property
insurance and new title insurance is necessary.
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