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Consider What You Are Trying To Accomplish By Refinancing!
Rob Robertson, "Mortgage Broker"
San Jacinto, CA
Contributions: 169
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There are many reasons why homeowner's refinance: To lower an existing interest rate, to shorten the term of a mortgage, to convert an ARM to a Fixed-rate mortgage, to access home equity to pay for a large purchase or expense, or consolidate debts.
As it typically costs between 1.5% to 5% of the new mortgage's principal, and requires an appraisal, title search and insurance, escrow, origination and lender fees, it is important for you to determine whether the reasons for refinancing offers a true benefit, as it takes years to recover the costs with savings generated by the lower interest rate.
One of the best reasons to refinance is to lower the interest rate on an existing loan. Typically, a 1% reduction in the interest rate is enough of an incentive to refinance. Reducing the interest rate not only helps to save money, but also increases the rate at which equity is built in a home and can decrease the size of the monthly payment.
Refinancing can be a sound financial move if it reduces a mortgage payment, shortens the term of a loan, or helps build equity faster. Also, when used carefully, it can also be a valuable tool in getting debt under control.
Before refinancing you should take a careful look at your financial situation and ask yourself, "How long do I plan on keeping my house?" Another good question you should be able to answer is "How much money will I save by refinancing?"
A savvy homeowner is always looking for ways to reduce debt, build equity, save money and eliminate that mortgage payment. Making sure it truly makes sense to refinance will help take the guess work out of the decision-making process.
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