Mortgage refinancing
If you are having trouble paying off your home mortgage due to high interest rates or maybe you just had a bad deal with a bank or financing company, you might want to try mortgage refinancing.
Mortgage refinancing refers to the process of taking out a new home mortgage and using some or all of the proceeds to pay off an existing mortgage on your home. The main purpose of refinancing is to obtain a lower interest rate or lower your monthly payments by extending the term of your loan. By extending the term of your loan, you will reduce your monthly mortgage, but rember that you will end up paying more total interest over the lifetime of the home loan.
When you do refinance your home mortgage, you might want to make sure that your monthly savings or earnings from refinancing will pay back the costs that are associated with refinancing while you are still living in your home. If you move before your refinancing has paid for itself, you really won't be saving any money.
There are normally 2 types of mortgage refinancing:
- no cash-out refinancing and
- cash-out refinancing.
No cash-out refinancing occurs when the amount of the new loan does not exceed the mortgage debt that you currently owe. Typically in the Philippines, you can borrow up to 80 percent of your home's appraised value with this type of refinancing.
Cash-out refinancing occurs when you borrow more than you owe on your current home mortgage. You are typically limited to borrowing no more than 65 percent of your home's appraised value with cash-out refinancing. The excess cash can be used for setting up your own business. Most people use this type of refinancing to pay off other outstanding loans, since the interest rate they pay on the extra cash they borrow will usually be less than the interest rate on the debt that they pay off.
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