Refinancing your mortgage – is it the right choice for you?
Mortgage refinancing is an option for many homebuyers who are paying interest rates 2-3% or higher than what they can find today, or who need extra cash. Were you a first-time home buyer or did you have bad credit the last time you got a loan? Now you’re on your feet and making a salary that can help you get the best interest rates. You probably want to refinance your mortgage so you can free up some funds for a new car or for education. There are many options available when you refinance.
Before deciding whether refinancing is right for you, take a look at your current situation
financial situation. Do you have an adjustable rate loan or a fixed rate loan? How long do you plan to be in your home after you receive
your new mortgage? What is your ultimate goal? Most people want to refinance so they can access more money now.
Refinancing is a great solution, but it is
Is refinancing your loan the right decision for you?
The first step is to contact your lender and be aware of what your monthly payment is
is now. It’s also helpful to know how much you’ve paid on your mortgage towards the principal. Since you will be refinancing the amount remaining on the mortgage principal and not refinancing the original amount of the mortgage, it is really important to know how much
principal remains. If you plan to stay in your home for a long time and
If you still have a significant amount of principal on your loan, then a mortgage refinance can
may be a good option for you if interest rates are lower than when you got yours
last loan.
Just like most conventional loans, refinancing offers similar options for adjustable and fixed rate mortgages and loans from 10 to 40 years. Be sure to
review with your mortgage lender the reasons why you are interested in refinancing; should you refinance to get money for home improvements or for a
buying a new car? These are important factors to inform your lender about as you decide how to refinance your mortgage.
Another factor that determines whether borrowers will refinance is interest rates. Current mortgage rates can go up, and this often scares off refinancing borrowers who have ARMs because they fear that adjustable rates will go up after they refinance. It is difficult to predict what will happen to adjustable refinance mortgage rates over the next few years. If you refinance into a fixed rate mortgage during a high interest rate period, then when interest rates go down, you are left with a high fixed rate mortgage and another decision as to whether or not to refinance again. Of course, the only sure way to know if you should apply for a
refinancing is to evaluate the reasons for refinancing and how it will affect you in the future.
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