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Orange County Home Mortgage Loans |
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| Questions? Call (800) 745-1995 |
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Refinancing entails replacing, or paying off, an older, more expensive loan with a new loan that has certain financial advantages over the old loan. When you refinance, you do so because it is part of a financial strategy to lower your monthly payments and improve cash flow. You can refinance virtually anything that has additional value over what is currently owed. Since the early 1990's, though, very low mortgage interest rates have fueled a thriving demand for home refinancing. This is simply the process of paying off an older, more expensive loan (or loans) with a new and lower interest rate loan. In some cases the new rate and term loan simply replaces the old loan principal (no cash out) with lower monthly payments. In other cases, if you've run up a significant amount of consumer debt - usually at rates well above mortgage rates (and more expensive interest computation methods), it may make sense to consolidate consumer debt into the new home loan - assuming sufficient equity exists - and clear your credit cards. This financial strategy results in total lower interest expense and reduced total cash out flow each month. A word of caution, however. Using home equity to pay off consumer debt is like using your home to pay for food, gas, clothing, appliances and other consumables that have no investment value. Be careful!! If you need to consolidate consumer debt with home equity capital - do it only ONE time, and as part of an overall strategy to increase your credit score, improve your standard of living… and start down a "new path" of personal spending management. Also, when significant home equity exists and a lower interest rate benefit is to be gained, many home owners will refinance to get cash out of their home. This surplus cash can then be invested in stock or other debt instruments that have a higher yield than the low mortgage interest rate being paid. |
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