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Should I Refinance My Mortgage? Three Questions to Ask Yourself
Joe and Helens neighbors couldnt say enough good things about refinancing their mortgage. They mentioned how they had eliminated credit card bills, and lowered their overall interest rate. They had even been able to get some cash back to help with their daughters college tuition. It sounded great, and Joe and Helen decided they should probably refinance too. But, is refinancing for everyone? Should you consider refinancing? Here are a few questions to ask to determine whether it might be a good idea for YOU to consider refinancing:
1. How high is my current interest rate? If the going interest rate is 6% and your loan is at 8.5%, you definitely should consider refinancing. In fact, the current rule is if your interest rate is 2 percentage points or more above the market rate, refinancing may be for you.
2. How long do you plan to stay in your current house? Are you planning to move this year or in the near future? Or are you in your house for the long haul? You need to be sure that the savings in interest money is enough to offset the costs of refinancing (closing costs, etc). However, even if you are planning to move within the next year or two, check with your current mortgage company. A little-known secret is that often they will refinance for you with no closing costs to keep your business.
3. Do you want to switch to a shorter term mortgage? Switching from a 30 year mortgage to a 15 year mortgage can significantly reduce your interest payments, and help you build equity much faster. There are a lot of calculators online to help you figure out the savings. Check out www.mortgage-refinancing-online-guide.com for useful articles, advice, and tools to help you in your decision.
These are only a few of the questions to consider when you think about refinancing your mortgage. Do a lot of reading, figure out your savings, and talk to a professional to find out if refinancing is right for you.
Refinancing Your Home Mortgage Loan - Is Refinancing For You?
Refinancing is the act of paying off one loan by obtaining another, using your homes equity. Refinancing is generally done to secure better loan terms, such as a lower interest rate and lower monthly payments. If you are thinking of refinancing, you should analyze your current situation to find out if refinancing is the best choice for you.
Refinancing your home can seem like the perfect solution to having more money in your pocket by way of reducing your monthly payments, and/or having money to pay off pending debts, or buy that new item or vacation that you just can?t live without. Yet, refinancing isn?t as easy or infallible as it may appear. There are many costs and potential downfalls to refinancing, so before you sign on the dotted line, you may want to look at the entire picture and use good judgment to decide if refinancing is the best decision for you.
Fees Associated with Refinancing
Remember the fees incurred in your first mortgage? Be prepared to dish them out again when refinancing your home. There are application fees, title search and title insurance fees, appraisal fees, survey costs, homeowner?s insurance, attorney?s fees, loan origination, and inspection fees, as well as mortgage insurance and points. Unless your interest rates and monthly payments are being significantly reduced, you may not be saving much in the end.
Question To Ask Yourself Before Refinancing
Will your interest rate be lower? Compare your interest rate to the current interest rate.In the end, what are your total savings?
How long do you plan on staying in your home? If it?s three years or more, it may be a good idea.How long will it take to break even before you recover the closing costs? Do you have cash for closing? Is refinancing something you can afford at the moment, to gain better terms in the long run? Is the value of your home increasing (excellent) or decreasing (could be an issue)?
If you are considering refinancing, remember that there are a variety of different mortgages to choose from. Educate yourself on your options and take all information into account. If you are getting a significantly low interest rate, then refinancing may be the best choice. Talk with your lender to find the best options available for your unique situation.
"No Cost" Refinance Mortgages Are Best For the Short-Term
?No cost? refinance mortgages are a good option for those planning to keep their home loan for less than two years. A ?no cost? mortgage allows you to focus on finding the lowest interest rate, not worrying about fees.
What Is A ?No Cost? Mortgage Loan?
A ?no cost? mortgage is where the lender pays all the closing costs. The borrower pays nothing upfront ? no points, no third party fees, no closing costs. These costs aren?t wrapped into the loan?s principal either. For this benefit, you will usually be charged a point or more.
?Zero fees? or ?zero points? are not a ?no cost? mortgage. With these types of mortgages you can still be responsible for third party fees.
When to Refinance With A ?No Cost? Mortgage?
You can save money on refinancing when you plan to keep the loan for two or less years. By not having to pay any out of pocket expense, you don?t lose on selling or refinancing again.
The drawback is that if you keep the loan for longer than two years, this type of mortgage will be more expensive than if you picked a traditional home loan. Paying closing costs and points lowers your interest rates, giving you a savings each month. The longer you keep your loan, the more you save.
You also need to make sure that the mortgage you plan to refinance has higher rates than a ?no cost? mortgage. Be aware too that you miss out on the tax deduction for mortgage points prepaid. Your income level will also affect your mortgage interest tax advantage.
Finding Rates for a Mortgage Refinance
Finding ?no cost? rates takes a little bit of searching. When you are requesting rates, check the box for ?no cost.? When you receive your quote, the APR and interest rate should be the same. Some lenders have varying definitions of ?no cost.?
The only reason to choose a ?no cost? refinance mortgage is if you plan to pay off the loan in two years. If you want a no cash refinancing loan, there are several lenders who will include the costs in your loan?s principal. This will qualify you for lower rates and increase your savings.
No matter what you choose, compare quotes first to see your savings.
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