Real Estate Marketing & Beyond
You have a lot to consider before you decide to refinance your mortgage. There may be fees that are associated with the refinancing that can cancel out the savings benefits. Before you decide to refinance, carefully consider the long-term implications of doing so. Here are some of the signs that refinancing may be in your best interests.
Need to Lower Monthly Payment
Depending on how long you’ve had your current mortgage, you may have built up some equity. Refinancing your home for this lower amount can save you some money each month. You may also be able to get rid of the mortgage insurance that was initially required on your home loan. All of these little savings may be enough to get you a lower monthly payment.
Interest Rates Have Dropped
The most common reason that people choose to refinance is that the interest rates have dropped. You’ll need to sit down with a mortgage lender to determine how much money you could save. Make sure that the interest rates have dropped enough to make it worth your while to considering refinancing at this point.
Change in Term Length
You may want to change the current term length of your loan. A large majority of mortgages are for 30 years. You may be considering changing it to a 15 year loan. This will likely make your monthly payments higher, but you’ll be saving on the amount of interest. Another common thing is to refinance to a 30 year again in order to reduce the monthly payments further.
Improved Credit Score
Having an improved credit score may qualify you for a lower interest rate. Some banks will offer you a rate that is at prime if you have a high enough credit score. This can save you some money on your interest over the life of the loan. You will have to carefully consider if this savings is enough to pay the costs of the refinancing.
Home Renovation Needs
Many people choose to cash out their equity in order to tackle home renovation projects. This solution may be easier for you than qualifying for a home line of credit. Your renovation costs would be spread out over the life of your mortgage. Make sure that your renovations are worth the extra costs.
Refinancing is a big decision. Go into the process with your eyes open. Know the facts before you start refinancing.
About the Author: Lizzie Weakley is a freelance writer from Columbus, Ohio. She went to college at The Ohio State University where she studied communications. In her free time, she enjoys the outdoors and long walks in the park with her 3-year-old husky Snowball. The information in this article is credited to Homemortgage.com
