- 1 If you are considering refinancing your home, use these Refinancing Tips:
- 2 For what reasons would it make sense for me to refinance my mortgage?
If you are considering refinancing your home, use these Refinancing Tips:
Determine your main goal
Do you want to refinance because you would like to save money each month? Would you like to get some cash out? Are you in a ARM that is adjusting and you would like to get into a fixed mortgage?
Once you know the reason for refinancing, you should ask your mortgage specialist whether or not it would be beneficial for you to refinance at this time or whether it may be more beneficial to wait.
Find out if you qualify for a government subsidized loan
Almost 30 million Americans qualify for a VA Loan. With a VA Loan, you can qualify for a VA Streamline Refinance. You may also be able to refinance your home with an FHA Streamline refinance.
Take into consideration how long you will live in your current home
If you plan on moving out of your existing home within the next few years, it may not be beneficial for you to refinance. Make sure you let your mortgage specialist know your future plans.
Can you consolidate your Debt with a Loan Refinance?
Refinancing your mortgage can allow you to take cash out of the equity which you have built in your home. You can pay off your higher interest debts and pay all of your debts at a lower interest rate. This will allow you to save money on a monthly basis and achieve your financial security.
For what reasons would it make sense for me to refinance my mortgage?
If you are able to get a lower interest rate
If you are able to get a lower rate that what you currently have, you can save tens of thousands of dollars over the life of your loan. Also, most lenders don't charge as many fees to refinance a mortgage and depending on how much equity you have in your home you may be able to roll the closing costs into your new loan, still have a lower balance than your original loan, a lower rate, and a lower payment.
Change the term of you mortgage
Changing the term of your mortgage can help in several ways. First, if you were to refinance your current mortgage from 30 years to 15 years, you will accelerate the rate at which you pay towards principle each month meaning your house will be paid off quicker. Also, you will save an unbelievable amount of money in terms of interest because you would likely be taking 10 to 15 years off the life of your loan. Second, you can also refinance a 15 year mortgage to a 30 year mortgage. It seems like it might not make sense to do this, but if you have an immediate need to free up monthly cash-flow and you don't want to take out a home equity loan, this can work out to your benefit. When you take a 15 year loan and refinance it to 30 years you will have the same balance only the payments can be hundreds of dollars less than the 15 year loan. The only draw back to this is you will pay more in interest over the live of the loan.
You need a large amount of cash, now
When you do a cash-out refinance you are leveraging the equity in your home in order to receive a lump sum of cash at closing. Many individuals and families use this type of loan if they want to remodel their home, or they have kids that are attending college soon.
You know you will be moving soon
If you know that you will be moving in 3 to 5 years, you might want to consider refinancing to a 3 or 5 year ARM (adjustable rate mortgage). These loans typically have a much lower rate that a traditional fixed rate loan such as a 30 year fixed, but they do have a fixed rate for the first 3 or 5 years of the loan. This will enable you to benefit from the lower rate, but you won't ever have to worry about the risk of a rate adjustment because you will be selling the home before the fixed-rate period ends. Follow the link for more information