Could you be wasting money with every monthly mortgage payment? Would a lower monthly mortgage payment benefit you and your household? Are your monthly home mortgage payments rising each year and getting harder and harder to pay? If you respond "Yes" to any of these three questions, you may want to consider refinancing your mortgage.
With recent high interest rates and the turmoil in the market - many people came to believe that refinancing their home loan was simply not an option. When you refinance you're simply taking out a new loan to pay off the existing one so it only makes sense if you obtain a lower interest rate enabling you to save money.
Fortunately, though, interest rates for most borrowers have recently dropped. In addition, the government has rolled out a number of programs to encourage lenders to help people refinance bad loans - especially those with adjustable interest rates.
Usually, there are two good times to refinance: 1) If you have an adjustable rate mortgage (ARM) and you're faced with an adjusting monthly payment; you can refinance to obtain a fixed rate mortgage and avoid the higher payments. Or, 2) if you already have a fixed rate mortgage, it might pay you to refinance if you can lock in a lower interest rate. In either scenario, an online service such as Bills.com can help you compare rates.
It's not a good idea to refinance if you're experiencing a cash flow problem and simply want to lower the payments by extending the term of your loan. With an extended term you'll be paying more interest over the remaining years that you own the home.
The first thing to do is calculate the cost of refinancing. There are various fees involved such as points, application, recording fees, title search and PMI fees. Other closing costs include survey and appraisal charges.
Also, a cash-out financing arrangement may make sense if you're disciplined on how you spend your extra money. A cash-out refinance is when you refinance and borrow more than you currently owe on your mortgage. Pay off the existing mortgage and any excess money is yours to use however you wish - most commonly borrowers use this cash to pay off credit cards or other higher interest rate debt.
If you make the decision to refinance, make sure you save enough to recover the cost. It could be just a break-even proposition. Usually, a good rule of thumb is not to refinance if you plan to move within three years. It probably will take at least that long to recoup the expenditures. Use Bills.com to find out if you are eligible to refinance and save money.
Remember that your refinanced mortgage will be secured by a lien on your home. If for some reason you're unable to make payments the lender can foreclose and possibly sell your home to pay off the mortgage.
The decision to refinance should not be taken lightly. Research your options, Educate yourself and ask for advice from trusted friends or colleagues. If your circumstance is right, it could lower your monthly mortgage payment, lift you out of debt and help make you a happier (and wealthier) homeowner.
For many people, now is the time to take advantage of this great option, so you may want to look into it and see if it makes sense for you. Click here to get started.