Your mortgage may have a term of 30 years, but many homeowners do not keep the same loan for that time. In fact, the average American refinances their mortgage every four years, according to the Mortgage Bankers Association. This is because the payment of your current mortgage and get a new one can mean big savings over several years. However, refinancing comes with a price in the short term, it is important to consider the costs and benefits before making their decision.
Why refinance?
Here are some reasons to consider refinancing your mortgage:
1. To obtain a lower fixed interest rate. If you took out a fixed-rate mortgage several years ago and interest rates have dropped, refinancing may lower your payments considerably. $ 150,000 with a mortgage of 30 years and a rate of 8 percent, for example, has a monthly payment of $ 1100. The same mortgage at 6 percent will pay less than $ 900 a month.
2. To switch to a fixed rate or an adjustable rate mortgage. Adjustable rate mortgages (arms) offer lower interest rates initially, but some homeowners find the fluctuations in voltage. If rates are on the way, you might consider locking in a fixed rate and consistent monthly payment. On the other hand, if you want to reduce your monthly payments and are comfortable with the changes the interest rate on an ARM, it could save money for an ARM to refinance.
3. To reduce your monthly payments. Long-term refinancing to reduce the amount you must pay each month. You will end up paying more interest over the life of your loan, but if you're having difficulty making your current payments, this strategy could provide some relief.
4. To turn home equity into cash. You can take a new mortgage with a great director, to convert some of their home equity into cash for a major expense. This is called the refinancing of cash. The advantage of having a loan secured by your home is that you can get a lower interest rate that can be an unsecured loan or credit card. However, if the interest rate offered for your refinanced mortgage is higher than its current rate, a home loan or line of credit might be a better choice.
Refinancing is right for you?
If you're refinancing in order to pay less interest, which usually do not see the savings immediately. This is because the lenders charge fees when you take a new mortgage, and you may also have to pay a fine to leave your old one. To determine whether refinancing makes financial sense for you, consider these questions:
1. How much time will be at home. If you expect to happen in a year or two, you may never realize the potential savings you get from refinancing. As a general rule, the longer you plan to stay in their current home, which makes more sense to refinance.
2. The fine in your current mortgage. Many mortgages carry a penalty if they pay on time. The amount varies but is usually a small percentage of the outstanding balance, or several months of interest payments.
3. The costs of the new mortgage. When you take a new loan, your lender may charge a fee, including application, appraisal, origination and insurance fees, plus title search, insurance and legal costs that can add up to thousands of dollars. Lenders may also charge discount points, which are paid upfront to secure a lower interest rate. As a guideline, expect fees to eat up any potential savings unless your new interest rate is at least a half a percentage point lower than the current one.
Why refinance?
Here are some reasons to consider refinancing your mortgage:
1. To obtain a lower fixed interest rate. If you took out a fixed-rate mortgage several years ago and interest rates have dropped, refinancing may lower your payments considerably. $ 150,000 with a mortgage of 30 years and a rate of 8 percent, for example, has a monthly payment of $ 1100. The same mortgage at 6 percent will pay less than $ 900 a month.
2. To switch to a fixed rate or an adjustable rate mortgage. Adjustable rate mortgages (arms) offer lower interest rates initially, but some homeowners find the fluctuations in voltage. If rates are on the way, you might consider locking in a fixed rate and consistent monthly payment. On the other hand, if you want to reduce your monthly payments and are comfortable with the changes the interest rate on an ARM, it could save money for an ARM to refinance.
3. To reduce your monthly payments. Long-term refinancing to reduce the amount you must pay each month. You will end up paying more interest over the life of your loan, but if you're having difficulty making your current payments, this strategy could provide some relief.
4. To turn home equity into cash. You can take a new mortgage with a great director, to convert some of their home equity into cash for a major expense. This is called the refinancing of cash. The advantage of having a loan secured by your home is that you can get a lower interest rate that can be an unsecured loan or credit card. However, if the interest rate offered for your refinanced mortgage is higher than its current rate, a home loan or line of credit might be a better choice.
Refinancing is right for you?
If you're refinancing in order to pay less interest, which usually do not see the savings immediately. This is because the lenders charge fees when you take a new mortgage, and you may also have to pay a fine to leave your old one. To determine whether refinancing makes financial sense for you, consider these questions:
1. How much time will be at home. If you expect to happen in a year or two, you may never realize the potential savings you get from refinancing. As a general rule, the longer you plan to stay in their current home, which makes more sense to refinance.
2. The fine in your current mortgage. Many mortgages carry a penalty if they pay on time. The amount varies but is usually a small percentage of the outstanding balance, or several months of interest payments.
3. The costs of the new mortgage. When you take a new loan, your lender may charge a fee, including application, appraisal, origination and insurance fees, plus title search, insurance and legal costs that can add up to thousands of dollars. Lenders may also charge discount points, which are paid upfront to secure a lower interest rate. As a guideline, expect fees to eat up any potential savings unless your new interest rate is at least a half a percentage point lower than the current one.
No comments:
Post a Comment