Mortgage Refinancing is a process in which you replace one or more existing loans or debts with a new loan, usually secured by the same assets. The most common type of refinancing is for home mortgages. Before you decide to go ahead and refinance, there are a number of facts you need to consider.
IS REFINANCING RIGHT FOR ME?
In most refinancing situations, the borrower does so mainly to reduce the interest cost and replace it with a new lower rate. Before you jump into refinancing, you must determine whether the new loan option will ultimately save you money.
When you purchased your home, there were a number of factors that determined your total principal amount. Credit rating, down payment and the current interest rates were at the top of that list, but these things change over time. It may now be beneficial to refinance with your higher credit score, increase of cash flow and lower home mortgage rates set by the Federal Reserve.
PAYMENT TRAPS: REFINANCING CAN HELP
A huge problem that many homeowners face is their adjustable rate mortgage. At the time, interest rates were low and it was a great loan. However, interest rates have risen and your payment is now out of hand. Another trap for homeowners occurs when one buys their home with the intention to sell in a few years. They’ve gotten busy or grown attached and our now stuck in an unstable loan. Refinancing could be the answer for you! You can now switch from your adjustable rate mortgage to a fixed-rate mortgage and protect yourself against fluctuating interest rates. You’ll have more security every month and hopefully, a cheaper interest rate!
Some homeowners may have had to pay an extra fee called Private Mortgage Insurance (PMI). This is required for borrowers who cannot pay 20 percent of the loan for their down payment and the amount financed is greater than 80 percent of the appraised value. If your house has increased its value since your purchase and you’ve consistently made your payments, your home equity may now be above that 20 percent. Refinancing may actually get rid of the PMI payments.
Be careful with the refinancing option you choose. Certain types of refinancing options contain penalties for early payments as well as closing and transaction fees. Make sure to do your math, as in some cases these extra fees may offset any savings through the refinancing loan.
IS THIS THE BEST OPTION FOR YOU? Call now for more info (970) 690-4920 or CLICK HERE
Information on this website is not intended to be Legal Advice.
Please consult with a Licensed Attorney and CPA prior to making significant decisions.
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