Should you refinance your existing mortgage?
Should you just knuckle down and make your payments?
Deciding whether the time is right to refinance is an
important decision.
Your existing mortgage should weigh heavily into your
decision to refinance. Take a close look at your terms
and the interest rate. If you’ve been “hearing”
that interest rates have never been lower, you should
consider refinancing. But don’t simply decide
to refinance based on what you’ve heard. You may
have qualified for an excellent interest rate when you
took out your original loan, and your credit may have
hit snags since then (meaning you won’t qualify
for good interest rates now).
On the other hand, you may very well find that you
can get a refinance loan at much better rates than your
original loan. You’ll probably be borrowing less
money and a lower percentage of the value of your house
– both situations can help your interest rate.
It only takes a few minutes to fill out an online application
to see what interest rates you can get on a refinance
loan.
Remember that you’re probably going to be paying
some closing costs and fees. Be sure that you’re
saving enough to make the refinance worthwhile. Talk
to any lenders you’re considering to determine
whether there are closing costs. Those fees can add
up to be a significant expense and could play a role
in your decision to refinance.
The length of the loan and total monthly payments are
also reasons to consider refinancing. If you’ve
been paying on your loan for at least a couple of years,
you may very well be able to stretch out the length
of the loan to significantly lower your monthly payments.
You may also want to shorten the length of your loan
to lessen the total amount you’ll be paying in
interest.
Another good time to consider refinancing is when you’ve
made major changes to your home or property values in
your neighborhood have skyrocketed. In either case,
the value of your home may be significantly more than
whatever the value was when you took out the original
loan. Since some lenders base their available interest
rates and terms on the comparison of the market value
of the house to the amount owed, you may qualify for
a better loan.
There are some times when it just makes sense to refinance.
Take a look at your situation to decide whether the
time is right for you.
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