Some Things to Consider If You Want to Refinance Your Mortgage
View PDF | Print View
by: marciafreeman
Total views: 58
Word Count: 429
A homeowner would be wise to consider a refinance of his mortgage when interest rates drop. People who do not want to decrease their monthly mortgage payment when given the chance are few and far between. You must do your homework beforehand, however, if you decide to refinance your mortgage.
Determine what your true purpose is for wishing to refinance your mortgage. Homeowners typically refinance their mortgage loans either to decrease their monthly mortgage payments by extending their loan terms or to lock in a lower interest rate. Debt consolidation is another major reason to refinance a mortgage. After all, why should you carry two separate mortgage loans (a first mortgage loan and a home equity loan) when you can combine their terms and interest rates into one single loan. A homeowner with an adjustable rate mortgage (ARM) would also find it attractive to refinance his mortgage with one carrying a fixed rate of interest. ARM interest rates are attractively low in the beginning but have the potential to rise to unaffordable levels during the life of the loan. A homeowner knows what to expect with a fixed rate mortgage.
You also need to examine your future housing plans before you decide to refinance your mortgage. It will take several months to realize the savings from that lower interest rate as lenders typically charge certain closing costs that will take months to recoup as savings. A refinance of your mortgage a year or so from an anticipated sale of the property does not make much sense. If you intend to remain in your home for the long haul, then refinance of your mortgage does make financial sense. A lower interest rate or a longer loan term will lower your monthly mortgage payment to a more comfortable level.
Whatever the reason you wish to refinance your mortgage, make sure your credit record is in good shape. A low credit score coupled with high credit card balances will definitely raise a red flag to potential lenders. However, many people choose to refinance their mortgage with one that exceeds the outstanding principal balance of their current loan, for the purpose of paying off their outstanding credit card debt. This strategy really pays off in the form of a mortgage interest tax deduction at income tax time. That does not mean you should play fast and loose with your credit record, however. Potential lenders may interpret your behavior as a sign of financial irresponsibility and decline the risk of lending you money.
About the Author
More topics related to home mortgage, click www.getsmart.com.
Rating: Not yet rated