Refinancing the mortgage on your home may seem like a helpful solution to managing your debt, but it is a rather complex and costly process. Only certain financial circumstances are likely to improve from refinancing, so you need to make sure you fit the bill before going ahead with this serious decision. In many cases, you can actually lose money and waste time by trying to refinance.
You Are Moving Soon
Refinancing is certainly not an overnight solution. The point of refinancing is typically to get a lower interest rate, but the process itself is quite costly. You will, at first, find yourself more in debt than you were before, until you pay back the refinancing fees. It takes the average person a handful of years to pay off these fees, so if you plan on moving any time soon, you should stick to the loan you currently have. If you will be living at your current residence for years to come, then you have an investment worth rearranging. Always make sure you have time to pay off refinancing costs before actually going through with changing your mortgage.
Your Loan Is Too Small
When you refinance a half-million dollar home, you could save yourself hundreds in mortgage payments each month. Doing the same with an 80-thousand-dollar loan will not even save you 100 bucks monthly. Paying off the costs will take a great deal of time at this rate. In order to see how much you stand to save, you should try plugging your loan status into an online mortgage refinance calculator. It can easily tell you whether or not refinancing is a wise decision on your part. This is a quick and painless way to figure out if the hassle of refinancing will pay off for you. Consumers Advocate.org is also a great resource to assist you with mortgage lender reviews
This Isn’t Your First Rodeo
A history of refinancing can reduce the benefits of doing so again. You may have procured a shorter-term mortgage for yourself the first time, but refinancing again will often result in a fixed long-term loan. Lowering your monthly payments is not so helpful when it means you will be paying off your home well into old age. Ideally, you want to own your home as soon as possible, so do not take on a financial decision that will keep you in debt for the rest of your life, no matter how good the interest rate is. If refinancing did not help enough the first time you did it, you should hold off before thinking about doing it again.
If you find that your loan situation does allow for you to benefit from refinancing, then you should certainly consider it. According to the Federal Housing Finance Agency, mortgage rates recently hit a record low. Many stand to benefit from lowered interest rates, but even so, not every situation applies. Research your unique situation before making a heavy decision like refinancing. You will save yourself money in the long run if you find out where you stand in terms of your home loan.
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