There should be a goal associated with
refinancing an existing mortgage. Refinancing can be
a great idea, but there are some things to consider
before you take that step.
Over the past few years, many people have found that
it was time to refinance simply because the existing
fixed-rate mortgage was achieved when rates were high.
Interest rates as a whole are lower than a decade or
so ago. If your loan is at a higher interest rate than
is generally available now, it could be time to refinance.
Another important point when considering interest rates
is your credit history. If you have credit issues when
you took out your original loan but those issues have
since been resolved, you may qualify for much better
rates even if interest rates as a whole have remained
constant.
Before you decide, remember that you’re likely
going to be charged closing costs and other fees for
refinancing. Most financial advisors seem inclined to
recommend that you don’t consider refinancing
unless you’re going to save at least one full
interest point, though some recommend at least one and
a half or two points. The reason? What you save in interest
will be eaten up by the closing costs. It’ll take
at least a couple of years to recover the difference.
The terms on your existing loan is another important
point to consider. You may have an adjustable rate mortgage
(payments vary from month to month depending on the
current prime interest rate), a balloon payment (the
entire balance of the loan is due at some specific time)
or other terms that are not what you’d like. Especially
if you’ve been making payments on time, your credit
score has improved or rates as a whole have come down,
it may be time to refinance.
Some people refinance in order to do home improvements,
cash out some equity or lower payments? How can refinancing
accomplish this? If you’ve accrued home equity
(the value of your home is higher than the amount you
owe), you can refinance a larger amount than the balance
of your current loan and use that money for home improvements
or other projects. Of you can borrow the same amount,
stretching the payments out over a longer period of
time to lower your monthly payments. You may also find
that putting a sum of money down with and refinancing
means you have both lower monthly payments and a shorter
loan term (and you’ll be saving even more because
you’ll be saving the interest on whatever amount
you put down).
There are some reasons that refinancing is a good idea.
Remember that just because you apply for a refinance
loan doesn’t mean you have to complete the process.
It only takes a few minutes to fill out our online application
form and you can find out how to put refinancing to
work for you.
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