Rising home prices combined with falling interest rates have motivated people to convert their accumulated home equity into expendable funds. This frequently works to their immediate advantage, giving them a considerably lower interest rate and lower monthly mortgage payments.
Homeowners can choose either to spend or save the portion of their incomes that are no longer being spent on mortgage payments.
When Should You Refinance?
In some cases, when refinancing, it helps to borrow more than is needed to pay off the earlier mortgage. This gives you the equity from your home, plus extra funds to cover the transaction costs of refinancing. People use the funds for a variety of purposes: to make home improvements, to repay older debts, or to buy goods, services or assets they couldn't otherwise afford.
How much can you save by refinancing? This depends on several factors relating to your present mortgage situation. If your new interest rate is low, it can result in substantial savings, perhaps even thousands of dollars. And when rates rise, having refinanced from a variable rate loan to a conventional loan, you can stand to gain substantially.
