Refinancing Your Mortgage – Is It The Right Choice For You?
Mortgage refinancing is an option for many homebuyers who are paying interest rates 2-3% or higher than what they can find today, or who need additional cash. Were you a first time homebuyer or you had poor credit the last time you obtained a loan? Now you are on your feet and make a salary that could help you receive the best interest rates. Possibly you are looking to refinance your mortgage so you can free some funds for a new car or for educational purposes. There are many options obtainable when you refinance.
Before you decide if refinancing is right for you, look at your current
financial situation. Do you have an adjustable rate loan or a fixed rate loan? How long do you plan to be in your home after you acquire
your new mortgage? What is your ultimate goal? Most people want to refinance so they can access more money now.
Refinancing is a great solution, but is
a refinance of your loan the right solution for you?
The first step is making contact with you lender, and be aware how much your monthly payment
is now. It is also helpful to find out how much you have paid of your mortgage towards principal. Since you will refinance the amount left on the mortgage principal, and not refinance the original mortgage amount, it is really important to know how much
principal is left. If you plan to stay in your home for a length of time and
nevertheless have a large principal left on your loan, then a mortgage refinance may
be a good option for you if interest rates are lower than when you obtained your
Just as with most traditional loans, refinancing offers similar options of adjustable and fixed rate mortgages and anywhere from 10-40 year loans. Be sure to
review with your mortgage lender the reasons you are interested in refinancing; do you need to refinance to acquire cash for home improvements or for a
new car buy? These are important factors to make your lender aware of as you are deciding how to refinance your mortgage.
Another factor that determines whether borrowers refinance is interest rates. Current mortgage interest rates can rise and this often scares refinance borrowers who have ARMs because they are afraid the adjustable rates will rise after they refinance. It is difficult to estimate what will happen to the adjustable refinance mortgage interest rates over the next few years. If you refinance into a fixed rate mortgage during a high interest rate period, then when interest rates go back down, you are stuck with a high fixed rate mortgage and another decision about whether or not to refinance again. Of course the only sure-fire way of knowing if you should apply for a
refinancing is to estimate your reasons for the refinance and how it will affect you in the future.