Everybody would love to have a little more money in their pocket, and many people are finding out that home refinancing can actually give them some extra cash at the end of the month. But all to often people jump in feet first, and end up spending more money than they save when they refinance their loan. So let's start by first looking at when refinancing is a good decision.
If your current loan has an adjustable rate, this is probably a good time to look into refinancing to a fixed rate loan. Chances are you'll save money. Adjustable rate loans can be good if you get the loan when the rates are high. But in the current rate environment it doesn't make sense. It could mean thousands of dollars in your pocket over the duration of the loan if you can simply lock in a low rate. Interest rates always go back up. When they do, you'll still be locked in at the current low rate.
Do you have a balloon payment coming due soon? Often times these payments can sneak up on you, and you may not be prepared. If this is the case, refinancing can be a life saver. And if your current rate is even slightly higher than what the market rate is, looking into refinancing is a good idea. Even a small difference of 0.25% will make big difference when flushed out over the length of a 30 year loan.
But in all cases you should carefully look at the closing costs for refinancing. They can be pretty significant. Then figure out how long it will take you to recover that money with whatever you will be saving every month.
Why is this important? Well if you plan on moving in the near future, refinancing may end up costing you money. Be sure you are going to stay in your home long enough to make up the difference, otherwise you're just throwing money away.
Also determine if your new loan has a pre-payment penalty. Most of them will, at an average cost of 2-5 years. This can hurt your bank account in two ways. Again if you are moving and will be taking out a new loan, or if you simply decide you want to pay it off early. Either way, you have to consider the money you will spend in penalties and compare it to how much you are saving monthly.
Finally, and perhaps most importantly, you'll want to look at your monthly payment. This is especially true if you're planning on taking advantage of a cash out option. The cash out option will give you spending money now, but it will also increase the balance on your loan. If your new interest rate is not significantly lower than what you are currently paying, your monthly payment could go up just because the balance is higher. You want a rate low enough that your payments will go down, in spite of the fact that your balance increases.
The bottom line is that home refinancing can be extremely beneficial to your bank account, but it can also jeopardize your financial health if you make a deal under the wrong conditions or at the wrong time. Weigh out the fees, costs and potential penalties against your monthly savings. If you see this will work, then begin shopping for a lender. Don't just take the first offer you get because there are a wide variety of terms and rates available. And be sure to get recommendations from friends and relatives as well. They've been through the process and can let you know if their lender is easy to work with.
Do this right, and it's like money in the bank. Do it wrong, and you could be paying for years to come. - 29904
If your current loan has an adjustable rate, this is probably a good time to look into refinancing to a fixed rate loan. Chances are you'll save money. Adjustable rate loans can be good if you get the loan when the rates are high. But in the current rate environment it doesn't make sense. It could mean thousands of dollars in your pocket over the duration of the loan if you can simply lock in a low rate. Interest rates always go back up. When they do, you'll still be locked in at the current low rate.
Do you have a balloon payment coming due soon? Often times these payments can sneak up on you, and you may not be prepared. If this is the case, refinancing can be a life saver. And if your current rate is even slightly higher than what the market rate is, looking into refinancing is a good idea. Even a small difference of 0.25% will make big difference when flushed out over the length of a 30 year loan.
But in all cases you should carefully look at the closing costs for refinancing. They can be pretty significant. Then figure out how long it will take you to recover that money with whatever you will be saving every month.
Why is this important? Well if you plan on moving in the near future, refinancing may end up costing you money. Be sure you are going to stay in your home long enough to make up the difference, otherwise you're just throwing money away.
Also determine if your new loan has a pre-payment penalty. Most of them will, at an average cost of 2-5 years. This can hurt your bank account in two ways. Again if you are moving and will be taking out a new loan, or if you simply decide you want to pay it off early. Either way, you have to consider the money you will spend in penalties and compare it to how much you are saving monthly.
Finally, and perhaps most importantly, you'll want to look at your monthly payment. This is especially true if you're planning on taking advantage of a cash out option. The cash out option will give you spending money now, but it will also increase the balance on your loan. If your new interest rate is not significantly lower than what you are currently paying, your monthly payment could go up just because the balance is higher. You want a rate low enough that your payments will go down, in spite of the fact that your balance increases.
The bottom line is that home refinancing can be extremely beneficial to your bank account, but it can also jeopardize your financial health if you make a deal under the wrong conditions or at the wrong time. Weigh out the fees, costs and potential penalties against your monthly savings. If you see this will work, then begin shopping for a lender. Don't just take the first offer you get because there are a wide variety of terms and rates available. And be sure to get recommendations from friends and relatives as well. They've been through the process and can let you know if their lender is easy to work with.
Do this right, and it's like money in the bank. Do it wrong, and you could be paying for years to come. - 29904
About the Author:
Did you know you can even refinance your trailer or upgrade your economic condition with a manufactured home refinance? Learn about these methods and other house refinance information by going to www.home-mortgage-refinancing-loan.com.
No comments:
Post a Comment