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Mortgage Refinancing Record low interest rates have made mortgage refinancing very popular in recent months. By refinancing your mortgage, you may be able to consolidate other debt into your home loan or lower your monthly payments. You might even be able to use the “cash out” option - make a small increase the amount of your loan and get the money out as cash. Before you decide if this is the best time to refinance, consider a few things. First of all, you should make sure that you have some money set aside for fees. Secondly, find out if the value of your home is going up or down. The most important question, though, is: how long do you plan to stay in your home? If you plan to stay more than three years and can receive a significantly lower interest rate, this is probably a good time for you to take steps towards mortgage refinancing. Go online to find free mortgage refinancing calculators. These handy tools will help you pinpoint a “break even date.” After entering the amount of your predicted rate drop and estimated closing costs, you will be shown how long you should plan to stay in your home to break even. If you do plan to stay in the home that long, it may be time for you to refinance. Reduce the term One positive consequence of mortgage refinancing is the ability to reduce the term of your loan. By refinancing with a shorter term, you are able to build up equity in your home and save thousands of dollars in interest over the life of the loan. Though some people choose to go the other direction and use mortgage refinancing to lengthen the term of their loan, the benefits to this approach are short-term. Lengthening the term will lower your monthly payment, but will cost more in the long run. Taking time to see the big picture will help you make a wise decision. Convert equity to cash If you already have some equity in your home, mortgage refinancing is a way to turn that equity into cash. Though refinancing is not a debt solution, there are positive ways to use your equity to your advantage. This “cash out” option can make it possible for you to update a room or add living space to your home, adding to its value. Where to shop You might think that it is best to talk with your current lender about mortgage refinancing before you go elsewhere, but it is probably best to check with them last. They already have your business and may not be as motivated as another lender would be. Since a refinance would mean losing money for the existing lender, they may take advantage of your laziness and not give you the best rate. It is better to shop around for the best rates, then check with your existing lender to see what they can do for you. With the right lender, interest rate and terms, you might find that mortgage refinancing is a helpful financial tool and a great savings for you. Mortgage Refinancing | Credit Cards | Student Loans | Motorcycle Loans |
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