It can be difficult to determine whether or not you should refinance your home. This is when it helps to have mortgage refinancing tips. There are plenty of "rules of thumb" to refinancing. When you know what those are, you can figure out whether or not refinancing makes sense in your situation.
Here are some mortgage refinancing tips:
- Lower interest rate. If interest rates are dropping, it may be a good time to refinance. You will end up paying less in the long run, and in many cases, your monthly payments may be lower as a result of refinancing your mortgage at a lower rate. However, most experts caution that you make sure that the current interest rate is at least 1% lower than the current rate in order to get the best benefit from the lower rate.
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Sticking around for a while. If you are leaving the area soon, planning to sell your home, mortgage refinancing may not be the best idea. After all, the costs of refinancing, with closing costs, and in some cases prepayment fees, can amount to as much as 2% of your loan. This means that you need to be in your home for a few years to make refinancing worth it.
- Shorter loan term. Another way to save money, in the long run, is by using a mortgage refinance to shorten the term of your loan. You will pay less in interest since you will not be borrowing the money over as long a period of time. You may have higher monthly payments, that this mortgage refinancing tip can save you thousands of dollars over all.
- Getting a little extra cash. If you need a little more cash each month, mortgage refinancing may be a tip that can help you. If you have lower payments, that means a little more money in your pocket at the end of each month.
- Consolidating debt. If you have a great deal of debt that can't be consolidated in another loan program, it can be a good tip to use mortgage refinancing as a way to pay off your other loans. You have to have equity, however, in order for this type of mortgage refinance to work as a debt consolidation.
Understanding when it makes sense to refinance your home is an essential part of good asset management. Think about what you would like to accomplish, and follow common sense mortgage refinancing tips when deciding whether or not to refinance.
If you're looking for a reliable mortgage broker that can assist you with mortgage refinancing, consult Lendium today!