Why Do People Refinance Their Home Loans?

You're probably familiar with the concept of buying a home, but what about the concept of refinancing a home loan? Refinancing a mortgage loan is essentially the process of taking out a new loan to pay off your old loan, and people choose to do this for several different reasons. Here are a few examples of reasons why people might choose to refinance their homes at the Lake of the Ozarks.

Getting A Lower Interest Rate

This is often the first reason that comes to mind when people think about refinancing their mortgages. If interest rates have dropped significantly since you purchased your home, refinancing and locking in a lower interest rate may save you a significant amount of money in the long run.

Locking In A Stable Interest Rate

Say you purchased your home thinking that you would only be there for a few years, so you went with an ARM (adjustable rate mortgage). ARM loans have a fixed interest rate for the first few years, and then the interest rate adjusts to reflects the current rates. If you are planning on staying in the same place, refinancing could prevent your interest rate from rising down the road.

Converting To An Adjustable Rate Mortgage

On the other end of the spectrum, some homeowners may decide they won't stay in their home for as long as they originally thought, and they may decide to switch to an ARM in order to get a lower interest rate for the few years they stay in their home. 

Shortening The Term Of Your Mortgage Loan

The longer the term of the loan, the lower the monthly payments typically are. If you were not as financially comfortable when you purchased your home as you are now, you may have opted for a longer loan term in order to afford the monthly payment. Shorter terms often mean less total interest, though, so converting to a shorter term could be a good move if you can afford the higher monthly payment.

Lowering Your Monthly Payment

Depending on how much lower your new interest rate is compared to your original one, your monthly mortgage payment may decrease significantly. If you are counting dollars every month, having a lower payment can make a huge difference.

Securing Extra Cash
One form of refinancing is known as "cash-out financing," which involves taking out a loan for more than you presently owe on your house and pocketing the difference in cash. Some people do this when find themselves in need of extra money for any number of reasons, including home renovations, a child's college education, paying off other debts, buying other properties, or investing.

Weigh The Pros And Cons Before Refinancing
Refinancing can have some wonderful benefits, but it is a big decision and should not be made without careful consideration of all the potential drawbacks as well as the benefits. 

Looking For A Home At The Lake Of The Ozarks? Contact Gattermeir Davidson!

We are passionate about connecting buyers to their dream homes at the Lake. If you are ready to buy a new home or condo at the Lake of the Ozarks, contact us to get started!
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2011 REALTOR Salesperson of the Year

Missouri Association of Realtors

Gattermeir Davidson Real Estate, LLC

752 Bagnell Dam Blvd., Suite A

Lake Ozark, MO 65049

Office | 573.365.1555

Fax | 573.365.1766