Home Refinancing-Making The Right Choice
Saving money is always a good thing, but sometimes you're already stretched so thin that it seems like there's nowhere else to cut back. Perhaps now is the time to take a close look at your home loan. Home refinancing can be a great way to cut down on your monthly bills, but it can also end up costing you more than you save if you're not careful. So when is it a good idea?
Clearly the first thing to look at is your current mortgage. If you have an adjustable rate, a fixed rate loan at a low rate can normally save you money in the long run. Adjustable rate mortgages are good if you get your loan when rates are high, but in current rate environment they just don't make sense. If you can lock in a low rate, you will clearly save money over the length of the loan. When rates go back up, and they always do, you'll still have a great rate on your loan.
Another good time to refinance is if you have a balloon payment that will be due soon, and you simply don't have the funds available. Finally, if your current mortgage has a rate higher than the current market, then seriously look into refinancing. Even a savings of 0.25% can make a huge difference over the course of a 30 year loan.
But in all cases you should carefully look at the closing costs for refinancing. They can be pretty significant. Then figure out how long it will take you to recover that money with whatever you will be saving every month.
All to often people move before their savings exceed what they spend in closing costs. This is just like burning money. If you might be moving soon, refinancing is probably not a wise decision. Plan on being in your current home at least long enough to get back what you spend.
Also determine if your new loan has a pre-payment penalty. Most of them will, at an average cost of 2-5 years. This can hurt your bank account in two ways. Again if you are moving and will be taking out a new loan, or if you simply decide you want to pay it off early. Either way, you have to consider the money you will spend in penalties and compare it to how much you are saving monthly.
Lastly, be sure to take a close look at your monthly payment. Even with a lower rate your payment could go up if you plan on taking advantage of a cash out option. Sure you'll have more money in your pocket right now, but your new loan will now have a higher balance. So even at a lower interest rate your payment could go up. Of course if the new rate is much lower, your payment may be lower even with a higher balance. This is a good situation to be in. You'll have cash in your pocket and be making lower monthly payments as well.
Clearly there are a lot of potential advantages to home refinancing. But doing it at the wrong time can be very costly. Make sure you check all the savings against the fees and the outside factors such as a potential move. If it all makes sense, shop around for a good lender. You'll be surprised at how different their terms can be. Don't be afraid to ask friends and relatives for recommendations.
Making the right choice can pay off for many years to come.
Clearly the first thing to look at is your current mortgage. If you have an adjustable rate, a fixed rate loan at a low rate can normally save you money in the long run. Adjustable rate mortgages are good if you get your loan when rates are high, but in current rate environment they just don't make sense. If you can lock in a low rate, you will clearly save money over the length of the loan. When rates go back up, and they always do, you'll still have a great rate on your loan.
Another good time to refinance is if you have a balloon payment that will be due soon, and you simply don't have the funds available. Finally, if your current mortgage has a rate higher than the current market, then seriously look into refinancing. Even a savings of 0.25% can make a huge difference over the course of a 30 year loan.
But in all cases you should carefully look at the closing costs for refinancing. They can be pretty significant. Then figure out how long it will take you to recover that money with whatever you will be saving every month.
All to often people move before their savings exceed what they spend in closing costs. This is just like burning money. If you might be moving soon, refinancing is probably not a wise decision. Plan on being in your current home at least long enough to get back what you spend.
Also determine if your new loan has a pre-payment penalty. Most of them will, at an average cost of 2-5 years. This can hurt your bank account in two ways. Again if you are moving and will be taking out a new loan, or if you simply decide you want to pay it off early. Either way, you have to consider the money you will spend in penalties and compare it to how much you are saving monthly.
Lastly, be sure to take a close look at your monthly payment. Even with a lower rate your payment could go up if you plan on taking advantage of a cash out option. Sure you'll have more money in your pocket right now, but your new loan will now have a higher balance. So even at a lower interest rate your payment could go up. Of course if the new rate is much lower, your payment may be lower even with a higher balance. This is a good situation to be in. You'll have cash in your pocket and be making lower monthly payments as well.
Clearly there are a lot of potential advantages to home refinancing. But doing it at the wrong time can be very costly. Make sure you check all the savings against the fees and the outside factors such as a potential move. If it all makes sense, shop around for a good lender. You'll be surprised at how different their terms can be. Don't be afraid to ask friends and relatives for recommendations.
Making the right choice can pay off for many years to come.
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To find out more about home refinance go to Home-Mortgage-Refinancing-Loan.com. You'll get ideas to aid you in getting a new loan, and discover how a home equity refinance can put cash in your pocket.
posted by Debt Consolidation Loan at
10:47 AM
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