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Published Jan 15, 22
6 min read

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If you’re planning on moving again in the near future, it may not make sense to refinance since there’s no guarantee you’ll recover the costs. On the other hand, if you are planning on staying put, refinancing could potentially put far more back in your wallet than what you what’d you have to pay in fees.

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CNBC will update as changes are made public. During this era of economic uncertainty, refinancing your mortgage can give you some breathing room by lowering your monthly payments and/or saving you money over time. Americans are applying for refinancing loans at a 38% higher rate compared to last year, in part because the Fed slashed interest rates when the coronavirus pandemic hit and borrowing is now more affordable.

When you refinance, it means you're essentially taking out a brand new loan on your property, often for the remainder that you owe (but not always). Ideally, this new loan comes with better terms than your old one. This depends on a number factors, including how much equity you have in the house (i.

how much of the loan you've already paid off) and what your credit score is when applying. refinance mortgage benefits. While refinancing sounds great on paper, it may not always put you in a better position. It's best to weigh the pros and cons, taking your personal situation into account.CNBC Select spoke with Darrin Q.

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Here's what to keep in mind - refinance mortgage benefits. The benefits of refinancing your mortgage, Depending on what kind of loan you are eligible for, refinancing might offer you one or more benefits, including:a lower interest rate (APR)a lower monthly paymenta shorter payoff termthe ability to cash out your equity for other uses, The most immediate benefit of refinancing is that it helps cash-strapped borrowers find space within their monthly budget.

But when you refinance, you can also use it as an opportunity to use some of the cash from your home's value toward other costs: "Essentially 50% of the folks are pulling cash out, and they are looking at either reinvesting that money in other properties or sending their children to college or something like that," English explains.

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While this is not a reason to refinance, it's a nice perk and can be a good opportunity to build up an emergency fund if you don't already have one in place, using the money that would usually go toward your mortgage payment to fund the account. The pitfalls of refinancing your mortgage, While refinancing has many positive benefits, it could come with pitfalls if you're not prepared.

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However, if you only saved $200 per month, your "break-even point" would be 25 months (just over two years). Stay in the home for less time than that, and you won't truly be saving money long-term. You also need to have a clear idea of how you'll use the money you free up when you refinance.

If you plan to reinvest your equity in another property, education or another purpose, be sure to weigh the costs versus rewards. And if you plan on refinancing so you can pay off high-interest debt, have a clear plan avoid overspending in the future: "One of the downfalls that I've seen is that folks will have all of this new disposable income, from a lower rate and/or longer terms," says English (save on mortgage).

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They pay off their debt, but they have the ability to charge those cards again and they fall right back into the trap."If you spend the equity you've earned on debt payoff, you'll have to wait until your home value increases and you've put more years of payments toward the mortgage, before you're able to tap into that source of cash again.

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A dip in interest rates is often an ideal time to refinance. However, in addition to saving money, there are a number of other benefits that can come from replacing your old mortgage with a new one. Here are 5 benefits of refinancing your mortgage. 1. Get a lower interest rate and monthly payment As a borrower, you could potentially save thousands of dollars over the term of your loan when you lock in a lower interest rate.

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This interest savings could allow you to pay off other high-interest debt, add to your savings account or put more dollars toward retirement. 2. Pay off your home loan early Some borrowers are able to reduce the term of their loan by refinancing. If you are a borrower who has had your loan for a number of years, a reduction in interest rates can allow you to move from a 30-year loan to a 20-year loan without a significant change in monthly mortgage payments.

3. Lock in a fixed interest rate Borrowers with adjustable rate mortgages (ARMs) will often replace their loans with new ones that have a fixed interest rate (save on mortgage). This is especially true when an interest rate adjustment period is approaching and a lower fixed rate can be obtained by refinancing your existing loan.

There are three primary options for refinancing your mortgage, each with its own costs and benefits — personal and financial.

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What does it mean to refinance a mortgage Refinancing is when a homeowner gets a new mortgage loan to replace their current loan. Most people refinance to lower their interest rate and reduce their mortgage payments, often saving thousands in mortgage interest. But that’s not the only reason to refinance a mortgage - refinance mortgage benefits.

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