There are several factors you need to consider in order to determine if a refinance mortgage loan is right for you. For many homeowners, determining the right time to refinance may be a daunting task. Depending on your circumstances, mortgage refinance may or may not be worth it. Among the major factors that affect your decision are:
– The length of time you plan to stay in your current home
– The difference in interest rate that you can obtain on refinance mortgage as compared to your current loan
– The amount of equity you have
– The closing costs and pre-payment penalties
– Whether you would like to opt for cash-out refinancing
– Whether you currently pay private mortgage insurance
Based on these factors you will be able to decide whether refinancing is a good idea or not. In addition, you have to consider your current personal and financial circumstances.
If you plan to continue staying in your home for over five years then refinancing may be a good option. If not, then you may need to reconsider your options since there are several costs involved.
Most importantly, there must be a considerable difference in the interest rate as compared to your current mortgage, otherwise refinancing may cost you much more in the long term with higher monthly payments as well. It is essential to keep a watch on the interest rates. Staying locked in at a fixed rate can have the potential to save your hundreds of dollars.
Private mortgage insurance is an important factor to consider. If you are already paying private mortgage insurance on your current mortgage, you can eliminate the cost with refinancing. Speaking of costs, closing costs on a mortgage can be significantly high, therefore, make sure you determine these costs if you plan to refinance your home with the objective of saving money.
It is also essential to weigh the pros and cons of cash-out refinancing if you have equity built up on your home. I suggest getting advice from a mortgage broker as they usually know their stuff. You will need to evaluate your situation and then make a decision of a home equity loan or cash-out refinancing.
When choosing a lender make sure the company offers the lowest interest rates, closing costs, and other fees that may be involved. This can save you a great deal and make the process of refinancing worth the effort. Remember, your interest rate will have a significant impact on your monthly payment and the total amount you end up paying. Therefore, choose a lender that offers the lowest interest rate possible.
In your quest for lower interest rates, don’t make the mistake of choosing the first offer that you receive. It is essential to compare the rates and credibility of at least three lenders. The bottom line is to weigh the pros and cons of refinancing and assess your current financial needs. Often, you may find a short term loan is all you need. Refinancing is a long term commitment, for which you will need to remain vigilant when it comes to managing your finances.