Why do people refinance their homes?
- Lower their monthly payments
- Change from floating rate to fixed rate loan
- Remove some equity from current home mortgage
- Eliminate private mortgage insurance
The reasons are often to save money, lock in for security and peace of mind, or to get spending money. With so many companies competing for a bigger slice of the mortgage refinancing pie, a home owner should have a variety of options. But not all offers are equal. There are many factors to consider.
Home Equity Financing is not Cash-Out Financing
Both home equity and cash-out financing will put money in the home owner’s pocket. These two options are quite different.
A home equity loan does not replace the current financing structure. This type of loan is an additional amount borrowed against the equity of the home. It often carries higher interest rates than refinancing. This additional cost can be counter-balanced by not having closing costs which could number into the thousands of dollars.
