What does refinancing your house mean? what are the pros? what are the cons? thanks?

Donna
When you bought your house, you borrowed money...you "financed" it at a specific interest rate for a specific time.If interest rates fall lower than the one you have, you can "re-finance" your existing loan to borrow the money at a lower rate that might make your monthly payment lower and save you lots of interest in the long run.Generally there needs to be a 1.5 to 2.0 differential between your currnet interest rate and your new lower one to offset the new costs of borrowing..

Rhett
1.5-2.0 rate reduction is nice, but not always realistic these days.0.75% is the lowest reduction of your blended rate to consider. Report Abuse

Amira
Well, when you finance, you agree to pay back your loan at a certain percentage rate. When you refinance, you are essentially agreeing to pay the remaining balance at a new percentage rate. You may choose to refinance when the going interest rates are considerably lower than what your initial interest rate was. Say your first loan several years ago was at 7.5%. Say the going rate you'd qualify for is 6.5%. You can refinance at the lower rate and have smaller monthly payments. You may also choose to refinance an adjustable rate interest loan (where the interest you pay changes month to month) when rates are starting to consistently rise. Say you started an adjustable rate mortgage at 4% but rates were climbing to 8%, then they fell to 6%. You could refinance at 6% fixed and no longer have to worry about rates rising to 8% or more. It wouldn't be worth the expense (there are fees involved in financing as well as refinancing) to refinance unless the rate is a full percentage point lower. For example, you wouldn't want to refinance a 7.5% loan to take advantage of a prevailing 7% interest rate. On the other hand, some ppl choose to refinance when they want to consolidate debt. But that's a whole new ball of wax.

Clark
It usually refers to instances where a house is mortgage free. Its a way of releasing capital from the value of the property without moving. Pros and cons - well, those are very dependent on your circumstances - e.g. age, income, health etc.

Contessa
To refinance your home means that you will be changing the loan. For example, if you borrowed $100, 000 at 7% for 30 years and 3 years later the 30 year rates drop to 5.5% you could refinance your mortgage and take advantage of a lower interest rate. The pros are that you can save money over the life of the loan on the amount of interest you will pay. The cons are that many people, in the past 10 years, as rates fell, refinanced their homes and took more money out to pay bills, go on vacations, redo their homes, etc. When housing prices fell their homes dropped in value and some ended up owing more on their loans than what their homes were worth.Some of those people are facing foreclosure and others are stuck in their homes hoping that the value will return.

Sally
Refinancing means that you would borrow money to pay offthe current mortgage on your home.The pros of this (and one reason to do it ...) would be to geta LOWER interest rate than you already have. It some cases, people refinance and their NEW MORTGAGE payment is actually lower than the previous payment.Sometimes people refinance to get money out of the house.Let's say that you purchased the house 10 years ago andthe house was worth $50, 000 ... and now the house isworth $80, 000. You can refinance based on the NEW value.That way ... you pay off (whatever) balance is due on the original $50, 000 mortgage. Now you can walk away with$30, 000 in cash. The "con" of that scenario is that NOW instead of owing having a $50, 000 mortgage ... you now have a $80.000mortgage. Now you do not have any equity in the home. Equity is thedifference between what you owe ... and what the value ofthe house is.In the first scenario ... where you owed $50, 000 and the house had accured in value to $80, 000. Well, here youhad $30, 000 worth of equity. That means that you could"possible" get a home equity loan of up to $30, 000. Mostpeople use the equity in their homes as financial security.If you have little or no equity in your home ... Obviously thatreducing or eliminates your financial security or "cushion."Be careful about refinancing and/or getting home equity loans. Depending on what area you live in ... Real estatevalues are dropping. (That is because of the current economy and a lot of predatory lending ... resulting in alot of foreclosures ... pulling overall property values down!)Get good advice from a trusted financial expert!

Isa
It means you will pay off your current loan with a new loan. It's a matter of if you are putting yourself in a better situation, that should determine if you should do it. Maybe you are looking to pay off credit card debt, or lower your rate, or you are getting divorced so you have to buy out your wife's/husband's equity in the home. Talk with your Loan Officer.

Mitsuko
Refinancing your house means you're borrowing money to either pay off existing loans or have fully paid off your home loans and want to borrow new money. The pro would be hopefully you're refinancing at a rate that is lower than the existing loans that you have. The con would be that due to falling real estate prices that your home might not be worth enough to borrow as much as you want/need.