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Should You Refinance?
by Michael VanDeMar
There are several reasons that might make someone consider refinancing their existing mortgage. One would
be to get a lower interest rate than what they currently have, thereby reducing monthly payments and lowering the
overall cost of the mortgage. Another is to shorten the length of the loan, which can save quite a bit in interest
payments. Thirdly, someone may have other debts that they wish to pay off, and refinancing may provide them a
means of consolidating that debt into one overall lower payment.
A lower interest rate isn't the only thing that should be taken into account when thinking about refinancing. There
are costs and fees associated with refinancing your mortgage. The bank will charge fees, there will be costs for
a new inspection and a new appraisal, title search, and so on. The process that is gone through is very much
like the process that one goes through on getting a first mortgage. It requires a new application with a new credit
check, survey, and sometimes an appraisal. As it is with a first mortgage, this can be a long and costly process.
In general, it makes sense to refinance if the interest rate on the new loan is at least two percentage points
lower than that of the current loan, although this is not always the case. Some things that need to be taken into
consideration are the total cost of the refinancing, the total monthly savings, and how long you plan to stay in your
house after you refinance. You can calculate how long it will take you to break even on refinancing costs by
dividing the total cost of the refinance by the monthly amount you will be saving. For example, if the cost is
$2,500, and you reduce your monthly payments by $100, then it will take 25 months to start seeing the savings
from the reduced mortgage rate. If you plan on staying in your house longer than this, then it may just make
sense for you.
Another reason that someone might consider refinancing is if they are trying to consolidate debt. In such cases,
there is also the tax impact that one should look at. Many loan types are not tax deductible, whereas mortgage
loans are. Therefore for that reason alone it may be a good idea to consolidate outstanding credit card debt,
student loans, car loans, as well as others.
Some people may not have a choice about refinancing, it is a must for them. This happens in cases where they
have a loan with a balloon payment coming up and no conversion option. In instances like this the best bet is to
refinance the mortgage a few months before the balloon payment is due.
If you do decide that the costs associated with doing a refinance outweigh the benefits, you should ask your
bank or financial institution if you can get some of the terms that you want by agreeing to a modification of your
current loan. However you choose to go, remember that it always makes sense to consult with a mortgage
professional before making your move. This can end up saving you both time and money. You should also do
research before making a decision. Spend some time on the web familiarizing yourself with what you are getting
yourself into. Take the time to read up on and understand what your options are.
More on Mortgage Refinancing
by Michael VanDeMar
There are several reasons that might make someone consider refinancing their existing mortgage. One would
be to get a lower interest rate than what they currently have, thereby reducing monthly payments and lowering the
overall cost of the mortgage. Another is to shorten the length of the loan, which can save quite a bit in interest
payments. Thirdly, someone may have other debts that they wish to pay off, and refinancing may provide them a
means of consolidating that debt into one overall lower payment.
A lower interest rate isn't the only thing that should be taken into account when thinking about refinancing. There
are costs and fees associated with refinancing your mortgage. The bank will charge fees, there will be costs for
a new inspection and a new appraisal, title search, and so on. The process that is gone through is very much
like the process that one goes through on getting a first mortgage. It requires a new application with a new credit
check, survey, and sometimes an appraisal. As it is with a first mortgage, this can be a long and costly process.
In general, it makes sense to refinance if the interest rate on the new loan is at least two percentage points
lower than that of the current loan, although this is not always the case. Some things that need to be taken into
consideration are the total cost of the refinancing, the total monthly savings, and how long you plan to stay in your
house after you refinance. You can calculate how long it will take you to break even on refinancing costs by
dividing the total cost of the refinance by the monthly amount you will be saving. For example, if the cost is
$2,500, and you reduce your monthly payments by $100, then it will take 25 months to start seeing the savings
from the reduced mortgage rate. If you plan on staying in your house longer than this, then it may just make
sense for you.
Another reason that someone might consider refinancing is if they are trying to consolidate debt. In such cases,
there is also the tax impact that one should look at. Many loan types are not tax deductible, whereas mortgage
loans are. Therefore for that reason alone it may be a good idea to consolidate outstanding credit card debt,
student loans, car loans, as well as others.
Some people may not have a choice about refinancing, it is a must for them. This happens in cases where they
have a loan with a balloon payment coming up and no conversion option. In instances like this the best bet is to
refinance the mortgage a few months before the balloon payment is due.
If you do decide that the costs associated with doing a refinance outweigh the benefits, you should ask your
bank or financial institution if you can get some of the terms that you want by agreeing to a modification of your
current loan. However you choose to go, remember that it always makes sense to consult with a mortgage
professional before making your move. This can end up saving you both time and money. You should also do
research before making a decision. Spend some time on the web familiarizing yourself with what you are getting
yourself into. Take the time to read up on and understand what your options are.
More on Mortgage Refinancing
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