If you are considering refinancing your home mortgage, there are many factors you should consider before making your decision, especially if you are refinancing to save money on your current loan. Your savings will be dependent on the number of years left on your current loan and the amount that you intend to refinance on your home.
Reasons for refinancing include consolidating high interest loans like credit cards, liquidating the equity, or lowering monthly payments with a more favorable interest rate. While refinancing for debt consolidation may, in fact, save you a considerable amount of money, refinancing for a lower monthly payment can actually cost you money, particularly if you intend to remain in your home for more than 15 years. There are more costs to consider than monthly interest rates when refinancing.
The amount of time left to pay on your current mortgage must be carefully considered before refinancing. If you have paid on your mortgage for more than half it's original term, refinancing could actually cost you money. If you are less than one third of the term into your current loan, than refinancing for a lower interest rate can result in savings over the life of the loan.
Always review the terms of any loan you are considering. If you don't understand the terms, seek help from an attorney or accountant that you trust. If you find, after reviewing all the aspects of the loan including the closing costs, the monthly equity increase and the point at which you actually begin realize savings, that the amount of savings is not significant, than you are better off remaining with your current mortgage. It's necessary to compare the amount of the principal and monthly payments of the new loan and your current loan based on the amount of time left on the loan.
Your debt to income ratio needs to be a consideration, especially if you are removing equity from your home. It is unwise to end up with an upside down loan, in other words, a loan on which you owe more than the value of your home. You will also need to know your FICO score. A high FICO score will enable you to receive lower interest rates. If your FICO score is low, you will probably not be able to get favorable interest rates.
The origination fees and closing costs on a refinanced loan can run into thousands of dollars. Is your interest savings going to be enough to cover the financing costs? How long will you have the new loan before the savings cover the costs? If the refinancing includes the fees, you will be paying interest on that amount as well as on the amount that you originally borrowed.
Thankfully, under the Obama administration, this has been scrapped BUT only for those who qualify e.g. Losing their jobs because rescission, hospitalization, or other problems that warrants the scrapping of the fee. If you can prove this, you can get government assistance to get a refinance. If you qualify, you can enjoy an affordable refinance but not until then.
Until you have reviewed your financial situation and the requirements for a refinance, you can assess your chances for paying off a refinance successfully. But if you are dealing with an Adjustable Rate Mortgage and want to switch to a lower Fixed Rate Mortgage, lock into the lowest rate now after considering everything that goes into a refinance. If you'll break even soon enough and pay lower rates which you can comfortably afford, then by all means, check this option. - 20763
Reasons for refinancing include consolidating high interest loans like credit cards, liquidating the equity, or lowering monthly payments with a more favorable interest rate. While refinancing for debt consolidation may, in fact, save you a considerable amount of money, refinancing for a lower monthly payment can actually cost you money, particularly if you intend to remain in your home for more than 15 years. There are more costs to consider than monthly interest rates when refinancing.
The amount of time left to pay on your current mortgage must be carefully considered before refinancing. If you have paid on your mortgage for more than half it's original term, refinancing could actually cost you money. If you are less than one third of the term into your current loan, than refinancing for a lower interest rate can result in savings over the life of the loan.
Always review the terms of any loan you are considering. If you don't understand the terms, seek help from an attorney or accountant that you trust. If you find, after reviewing all the aspects of the loan including the closing costs, the monthly equity increase and the point at which you actually begin realize savings, that the amount of savings is not significant, than you are better off remaining with your current mortgage. It's necessary to compare the amount of the principal and monthly payments of the new loan and your current loan based on the amount of time left on the loan.
Your debt to income ratio needs to be a consideration, especially if you are removing equity from your home. It is unwise to end up with an upside down loan, in other words, a loan on which you owe more than the value of your home. You will also need to know your FICO score. A high FICO score will enable you to receive lower interest rates. If your FICO score is low, you will probably not be able to get favorable interest rates.
The origination fees and closing costs on a refinanced loan can run into thousands of dollars. Is your interest savings going to be enough to cover the financing costs? How long will you have the new loan before the savings cover the costs? If the refinancing includes the fees, you will be paying interest on that amount as well as on the amount that you originally borrowed.
Thankfully, under the Obama administration, this has been scrapped BUT only for those who qualify e.g. Losing their jobs because rescission, hospitalization, or other problems that warrants the scrapping of the fee. If you can prove this, you can get government assistance to get a refinance. If you qualify, you can enjoy an affordable refinance but not until then.
Until you have reviewed your financial situation and the requirements for a refinance, you can assess your chances for paying off a refinance successfully. But if you are dealing with an Adjustable Rate Mortgage and want to switch to a lower Fixed Rate Mortgage, lock into the lowest rate now after considering everything that goes into a refinance. If you'll break even soon enough and pay lower rates which you can comfortably afford, then by all means, check this option. - 20763
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