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Refinancing: A Smart Move
August 7, 2014

Should I refinance my mortgage? This is a question many people ask. Luckily, there are a number of reasons why refinancing may be a smart financial move.

Refinancing a mortgage means paying off an existing loan and replacing it with a new one. The most common reason a person may look to refinance is to get a lower mortgage rate. It is important to pay attention to the current average rates in order to get the lowest rate possible. A homeowner may also refinance in order to shorten the term of their mortgage or convert from an adjustable-rate mortgage to a fixed-rate mortgage, or vice-versa. It is wise to consider refinancing a mortgage now, while the interest rates are near record lows.

A refinance is also a way to get cash in your pocket. This can be done by getting a mortgage on a paid-off house. Although this isn’t technically a refinance, it’s a similar idea. This is a great option for individuals who are mortgage-free and have thought about purchasing a second home, an investment property, or starting a business. This way, they can cash out their first home and use the money to fund a larger purchase.

When used carefully, a refi can be a valuable tool to consolidate debt. Cash-out refis have dwindled since the housing bust began, however there are still a few. Many use these funds to pay off credit cards, lower overall debt service, and save money.

Some homeowners also decide to refinance in order to consolidate two mortgages.  The most common situation is to combine the first mortgage with the home equity line of credit. Although some home equity lines of credit often have low rates, many people want to refinance to get rid of them in fear the rate may jump to a greater percentage a few years down the road.

Lastly, refinancing may be a viable option for an individual attempting to address family matters. Divorces tend to lead to refis often as a means of removing the absent spouse from the note; thus, the other party is no longer legally responsible for the loan payments. Using a full service law firm like HoganWillig is a benefit in such a situation where a marital case and a real estate transaction are taking place simultaneously, because they can both be handled under one roof.

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