Is Refinancing Your Home Really the Right Decision?
Always do Your Research
Refinancing a mortgage can result in a number of things: a better monthly payment, a lower interest rate, a shorter term loan or home equity that you can use for another purchase. By paying off your original mortgage and signing for a new one with better conditions, you can be well on your way to paying off debt or saving money. But will you really benefit from refinancing your home?
There are a number of costs and variables that must be considered, otherwise you can wind up paying more on your refinanced mortgage than on the original one! Learn how to decide on home refinancing, and how to begin the process.
Getting Started
It's important to understand your mortgage and how it works. This includes the type, the term, and where your interest rate sits in relation to the current rate banks are offering. The market isn't always right for refinancing. By crunching the numbers and weighing your reasons will you be able to make an educated decision.
The total costs of the new mortgage must be less than your current mortgage for refinancing to make sense. Begin with an online calculator that's designed to help you determine the costs involved with refinancing your home, as well as your projected savings.
While it's not necessary to refinance with your original lender, it may be in your best interest to work with them. You might be able to negotiate a better price with your current mortgager, and you'll be able to avoid the costly property appraisal and other legal issues that come with a new lender relationship.
That being said, don't accept the first deal you find. The best advice on how to save money also applies to refinancing mortgages. You'll need to shop around and ask questions to find the right deal for you. If you're unsure how to assess the costs involved, consult a financial professional to help with your decision.
Refinance a Home Wisely
There are several reasons to refinance a mortgage, and some are better than others. Home refinancing to reduce debt is a wise move. Refinancing to borrow more money will likely land you in deeper money trouble than you had when you started. But even if your intentions are great, mortgage refinancing is not the best route for everyone. It will require patience and commitment to begin to see a return.
In other words, consider not only how many percentage points your interest rate will drop when you refinance, but also how long you plan to stay in the house in order to be sure you'll break even by the time you sell.
Be sure to discuss all of the important variables with your lender or financial advisor before refinancing. Once you've determined that the long-term savings will be worth the initial expenses, you can begin to gather more specific details on how to refinance your home.
