| Should You Refinance ?
There are times when it makes sense to refinance your mortgage. It’s important to have a clear financial objective in mind so that you’re more able to choose the most appropriate loan.
Ultimately, the decision is up to you to decide when it’s best for you to refinance, based on your individual financial situation.
Lower Your Monthly Mortgage Payment
A drop of just one half to three quarters of a percentage point in interest can lower your monthly payment. If you don't refinance, you may be paying too much every month for your loan, and that's never a good financial move.
There are a few different ways you can lower your monthly mortgage payment.
First, you can simply refinance to a lower interest rate. A lower rate generally means a lower monthly payment.
Second, you can change the term of your mortgage. For instance, if you have a 15-year mortgage, you can lengthen the term to 30 years. Since the balance of your mortgage is spread out over a longer period of time, your payment is lower. However, if you have a 30-year mortgage and one of your financial goals is long-term savings, you may want to consider shortening your term to 20 or even 15 years. Your payment will be higher, but you will pay much less in interest over the life of the loan, saving you thousands of dollars in the long run.
The third way to lower your payment is to refinance to an interest-only loan. Basically, with an interest-only loan, the minimum amount you are required to pay is the amount of interest for a certain period of time, though you can pay as much principal as you like. But you get the flexibility to pay less if you need or want to divert your money elsewhere, such as contributing to your 401k or saving for your child’s college tuition.
If you are considering refinancing your home, use these Refinancing Tips:
1) Determine your main goal |
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Do you want to refinance because you would like to save money each month? Would you like to get some cash out? Are you in a ARM that is adjusting and you would like to get into a fixed mortgage?
Once you know the reason for refinancing, you should ask your mortgage specialist whether or not it would be beneficial for you to refinance at this time or whether it may be more beneficial to wait. |
2) Find out if you qualify for a government subsidized loan |
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Almost 30 million Americans qualify for a VA Loan. With a VA Loan, you can qualify for a VA Streamline Refinance. You may also be able to refinance your home with an FHA Streamline refinance. |
3) Take into consideration how long you will live in your current home |
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If you plan on moving out of your existing home within the next few years, it may not be beneficial for you to refinance. Make sure you let your mortgage specialist know your future plans. |
4) Can you consolidate your Debt with a Loan Refinance? |
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Refinancing your mortgage can allow you to take cash out of the equity which you have built in your home. You can pay off your higher interest debts and pay all of your debts at a lower interest rate. This will allow you to save money on a monthly basis and achieve your financial security. |
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