Acquiring mortgage involves making of a lot of decisions and a good chunk of money. The individual is not only making a huge decision on the purchasing of the asset, it also involves payments on a periodic basis. Therefore, everyone that is acquiring a mortgage is looking for ways to reduce those payments. Or in other words, is looking for borrower benefits.
Borrower benefit is not a certain set of rules that every loan originator has or does offer. It is a few unique ‘benefits’ that the mortgage company plans to provide its clients. One of those benefits include ‘refinancing’. Refinance means the restructuring of a current loan with a new one. It mainly pertains to a new interest rate for the mortgage with way of a formula.
The refinancing can benefit the borrower in one of the following ways:
- Reduced interest rate – When the current market interest rate is lower than the one that is paid by the individual then there is always an incentive in going towards the low interest rate. But, in order to attain the new/lower interest rate, one requires to consult an experienced lender. The lender would be able to offer a new interest rate by way of a formula.
- A reduction in the monthly payments, both principal and interest – When the refinancing is attained, the monthly principal and interest payment would subsequently be reduced. It would give a better opportunity to the individual to save some money on their existing mortgage and payments.
- Decreased amortization term – Monthly payments are stressful and if they stretch for a long period of time then it can be quite painful. Therefore, the faster the individual can pay the mortgage, the better and less stressful it seems. Hence, with refinancing, there is an opportunity to reduce the amortization term.
- Shifting from adjustable rate mortgage to a fixed rate mortgage – Having a fixed rate mortgage is always beneficial. It allows a person to better manage their funds and subsequent monthly payments. If the mortgage has an adjustable rate then it can change periodically, increasing or decreasing the payments that one has to make.