Refinancing
Each month thousands of Americans refinance their mortgage. Should you refinance? There is no simple right or wrong answer to the question; it all depends on your individual needs, interest rates, and your current mortgage terms. The refinancing process is much like the original mortgage process because refinancing is simply paying off your old mortgage and taking out a new mortgage. Many of the procedures and costs are the same.
Is Refinancing Right for You?
If you are simply interested in refinancing the rate and term of your mortgage, you will need to weigh the costs associated with the refinance against the monthly savings that you will realize. Long ago the general rule was that refinancing pays off if the current interest rate on your mortgage is at least two percentage points higher than the prevailing market rate. In recent years, technology has reduced the costs associated to obtain a mortgage and the old adage no longer applies. The mortgage market is much more sophisticated than it was ten years ago and there are a lot of options and lending strategies available today.
Reasons for Refinancing
Here are some situations that may cause you to want to refinance.
• You want to get out of a high interest rate loan because the rates are now lower. You should consider
this only if you plan to stay in the house long enough to make the cost of refinancing worthwhile.
• You have an adjustable rate mortgage (ARM) and want a fixed-rate loan with payments that won't change over the life of the mortgage – or you want to convert your present ARM to one with lower rates.
• You want to consolidate your debts to take advantage of tax benefits and a lower your overall monthly outlay.
• You want to covert your loan to one with over a shorter term so you can pay your home loan off sooner.
• You need to draw on the equity built up in their house to get cash for a major purchase or for your children's education.
• You want to convert your loan to an interest only loan to explore more advanced wealth building strategies in order to take full advantage of idle equity sitting in your home.
