Merits Demerits Refinancing

Refinancing means paying off the existing loan by taking a new loan through keeping the same property as security. Most of the homeowners consider refinancing their home in hope of minimizing their mortgage rate or reducing the length of their mortgage. Apart from that, refinancing your mortgage also provides you a lot of stability.

Apart from that, there are various merits of the same. These are -

  • Refinancing your mortgage would help you mortgage the property at the lower rate. This will help you save extra bucks on daily basis and you can use the same to pay off the debt on the existing mortgage.
  • Another main benefit of the same is that it provides stability. If you have taken an adjustable rate mortgage etc the first place where the interest rate tends to fluctuate, refinancing it with fixed rate mortgage would help you in providing more stability while making your monthly payments.
  • If you have equity in your home then you can cash it out and then use it the way you want to, even to invest in another property.

Apart from all the merits, there are some demerits that you are required to understand before you decide to opt it for yourself.

  • Refinancing is not free and it involves fees. However, it is your choice to pay it off from your pocket or to refinance it. thus there is the cost involved.
  • There is a lot of financial risks involved in refinancing the mortgage it is taken as a recourse product that means that if you default on making the payment of the refinance loan then the bank can foreclose your house, keep the proceeds from a sale and can seize all your other assets.

Thus, if you are thinking about refinancing your mortgage then it is important to for you to consider these merits and demerits for you.