Does this scenario seem familiar? Every month, you pay money mostly towards interest, plus some towards the principal, until you have paid off your debt. If this sounds like a mortgage payment to you, then you’d be right.
Even though, at the beginning of your mortgage, most of your hard-earned dollars go towards interest, some will go towards the actual amount you borrowed. This amount is known as equity.
Home equity: The difference between the current market value of your house and the how much you still owe on it.
Did you know that the amount of home equity you have can fluctuate? It’s true. If your home has increased in value, you may have greater home equity than you would have thought. Likewise, if the value of your home has decreased, then you could have less home equity – regardless of how much you have actually paid towards the principal.
Let’s assume housing prices in your area have risen, and you have built up some equity. You can take out some of that equity to use towards, let’s say, renovations, college tuition, or paying off other debt that has really high interest rates. So how do you access this equity? You can refinance your mortgage.
Refinancing means you are replacing your existing loan with a new one – but with different terms. For example, you could extend the length of your mortgage, have smaller payments, or take advantage of lower interest rates. Even though it sounds like a great idea, you need to be aware of a few crucial points:
If you have your ducks in a row, refinancing to access your equity can be a smart move – and Shamrock Financial can show you how. Contact us today to see if refinancing is right for you, and take control of your finances for the better.