Lowering mortgage payment costs and erasing home loan debt faster is usually done by refinancing and, as was evidenced last year, many homeowners would take advantage of low interest rates that have been available by either refinancing their home loan for a longer mortgage loan, like a 30-year fixed rate mortgage, in the hopes of getting a lower monthly mortgage payment, but there are also some homeowners who shortened their mortgage term as a way to erase their debt faster. However, some homeowners have reportedly been using cash-in refinancing as a way to find more affordability in their home loan payments and, again, get out of debt faster than had they simply continued on their current payment course.
Cash-in refinancing, according to an article on ClarkHoward.com has become one of the more popular refinancing actions that homeowners have taken, as this type of home refinancing option can be beneficial under certain conditions. Some homeowners have been able to use cash-in refinancing when they may have seen a drop in their equity and wanted a more affordable rate and monthly payment, as they applied money towards their principal at the time of refinancing, but there are some traditional borrowers who have simply found themselves in a financial position to take advantage of low interest rates and potentially rid themselves of their home loan obligation faster.
While there are some reports that indicate homeowners may have to meet higher costs when refinancing or buying a home, those who are simply in need of more affordability in their home loan payment have been able to use funds at the time of refinancing to apply towards their mortgage and, in many cases, have either refinanced for a shorter or long-term mortgage, saw a lower interest rate, and many have gotten a lower payment on their home as well. Also, the long-term benefits of refinancing, particularly when a homeowner shortens the lifespan of their mortgage requirement, usually manifest themselves in the form of lower overall costs.
Consumers who are able to erase their debt faster will, obviously, pay less costs on their mortgage than had they continued meeting minimum payments on their home loan for the duration of their mortgage term. Understandably, homeowners may worry that putting money up front on their home when refinancing could create problems, if financial difficulties arise, but these individuals may put themselves in a better position to get out of debt on their home loan much sooner, at a lower cost, and one of the major expenses in their life will simply no longer be an issue.
However, homeowners must look at their financial situation before considering cash-in refinancing due to the fact that it can be problematic for some and may not be the best option for others. While there are some advisors who point out that homeowners who may not even be able to afford putting cash towards their mortgage or who will not receive a lower interest rate when they refinance will, understandably, not benefit from this form of refinancing, and there are some advisors who feel that options like simply making extra mortgage payments may be better.
In an article on Bankrate.com, it was stated that when it comes to a homeowner’s ultimate goal for refinancing, “…homeowners might be better off making extra mortgage payments rather than opting for a cash-in refinance. [Also], homeowners who intend to stay in their homes for the long-term are more likely to benefit from a refinance.” Some homeowners have used this method of simply making more payments then are required, as additional funds typically go to pay off a mortgage principle, but homeowners must make sure they will not incur any penalties if they pay off their home early.
Yet, when it comes to using refinancing as a method to lower mortgage payment costs and erase home loan debt faster, a homeowner must look at their particular situation carefully to make sure that they will benefit from this opportunity. While there have been some homeowners who have, in general, been able to use cash-in refinancing to their advantage, not every homeowner is in the financial position to reap the benefits of this option and must therefore look closely at their finances to see whether they are a good candidate or not.