When to Refinance Your Mortgage

2007-03-08 10:33:40

( Financial )



Many people have been attracted to the concept of refinancing mortgages because they can get money from their home equity even if their mortgage is not fully paid yet. This additional cash can be used to pay for the remaining mortgage, college tuition, or even a family vacation. Before getting refinancing mortgages, however, you should first determine when it is ideal for you to secure such loans. If you are not in dire need of cash, it would be wiser for you to first consider your reasons for refinancing your home loan. Do you want to substitute your existing home loan to one with lower interest rate? Are you going to use the cash to pay your credit card debts or other loans? The answers to these questions will help you decide when to refinance your mortgage.

Interest Rate

If your main concern is to get a loan with lower interest rate than your existing home mortgage, then you should be aware of the present interest rates for refinance mortgage in the market. If you are certain that the interest of refinance mortgage in your area will increase in the coming months, then it would be wise to refinance your mortgage, especially if it is an adjustable rate loan. Try looking for the best fixed rate refinancing mortgages available through the Internet or visit loan providers to secure quotes. However, you must think twice before you refinance your mortgage if you only plan to stay in your house for a short period. Changing to long-term fixed rate mortgage is best for those who are planning to stay in their homes for at least a decade or more.

Monthly Payments

If you want to refinance your mortgage because you want to lower your monthly payments, you should also check the existing refinancing loan rates. Just a slight drop in the interest rate could spell a big difference in your monthly loan payment. Thus, it is ideal to refinance your loan when the interest rate of your current mortgage is higher than the prevailing interest rate in the market.

You can also lower your monthly payment by securing either a longer or shorter mortgage term. If it is difficult for you to pay the monthly sum of your home loan, a refinancing loan whose payment period is longer than your existing mortgage is advisable. But if you are aiming to get long-term savings, you can replace your current home loan with a refinance mortgage with shorter payment period.

Payment of Other Debts

If your reason for refinancing mortgages is to pay other debts, you should ensure that the interest rate applicable to your loan is lower than the interest rate of your other debts. You will end up paying more if the interest of your refinance mortgage is significantly higher than that of your other liabilities.


All rights Reserved © Tradenet Services srl
Do not duplicate or redistribute in any form.