California Home Refinance Options: Refinancing and Your Needs

Karen Lawson
LoanBiz Columnist

California homeowners may have enough home equity to fund a wide range of projects, goals, and activities. Understanding how mortgage refinancing works can help you decide which type of home refinance choice can best meet your needs.

Refinancing: When and Why to Consider a New Mortgage

Paying off your existing mortgage with a new mortgage loan is called refinancing. People refinance their mortgages for many reasons, but typically, you want to consider refinancing if you desire a lower mortgage rate or want to access additional cash from home equity. Refinancing your mortgage can depend on your current financial standing, your credit rating, and how long you plan to own your home. If you want additional cash from refinancing, the value of your home and what you currently owe on your mortgage can influence your lender's approval in cash out refinancing.  The difference between what you owe on your present mortgage and what your home is worth represents estimated home equity. Keeping a cushion of home equity is recommended due to fluctuating property values in many areas. California mortgage refinance transactions typically include the following:

• Refinancing to stabilize payments and/or lower interest rates. If you have an ARM loan with a low initial rate that's about to adjust upward, refinancing to a fixed rate mortgage can provide peace of mind by stabilizing your principal and interest payments (P & I)

• Eliminating negative amortization. If your mortgage carries a very low initial interest rate, the unpaid portion of interest may be added to your mortgage amount. This can reduce home equity and lead to trouble if your home value declines. 

Cash Out for Debt Consolidation

If you are having problems paying credit card and other consumer debts, refinancing to pay off high cost debt may help reduce high interest rates and other costs often associated with consumer debt.  California home refinance options may include taking cash out for debt consolidation, but taking cash out can raise your mortgage payment and your mortgage amount. If you consolidate debt through mortgage refinancing and continue to incur debt, you can find yourself owing more than you did before refinancing. Consulting a credit counseling agency can help you determine if refinancing can help you manage your debt.

Repairing and Remodeling

If you've owned your home for a long time, you may have enough home equity to fund major repair and remodeling projects. If you're planning to sell your home, investing in repairs and updates can help you maximize your home's value. If you're keeping your home, making repairs and improvements can improve your qualify of life while adding to the home's worth.

California mortgage loan options can provide the home financing you need. Contact your mortgage lender to discover which mortgage refinance options can work for you.

About the Author
Karen Lawson is a freelance writer with more than fifteen years of experience in mortgage banking. She holds BA and MA degrees in English from the University of Nevada, Reno