Home Refinancing-Making The Right Choice
November 11th, 2009 by Ned DagostinoSaving money is always a good thing, but sometimes you’re already stretched so thin that it seems like there’s nowhere else to cut back. Perhaps now is the time to take a close look at your home loan. Home refinancing can be a great way to cut down on your monthly bills, but it can also end up costing you more than you save if you’re not careful. So when is it a good idea?
Clearly the first thing to look at is your current mortgage. If you have an adjustable rate, a fixed rate loan at a low rate can normally save you money in the long run. Adjustable rate mortgages are good if you get your loan when rates are high, but in current rate environment they just don’t make sense. If you can lock in a low rate, you will clearly save money over the length of the loan. When rates go back up, and they always do, you’ll still have a great rate on your loan.
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.
Of course that all sound great but naturally there are some things to look out for as well. Carefully examine the closing costs. Refinancing is not free and some of the costs associated with it can be pretty significant. Once you know the costs, do some figuring to determine how long it will take to to recover that money from the savings you see each month.
All to often people move before their savings exceed what they spend in closing costs. This is just like burning money. If you might be moving soon, refinancing is probably not a wise decision. Plan on being in your current home at least long enough to get back what you spend.
Also look at the potential pre-payment penalties on your new loan. Most new loans will have them, and the average cost is 2-5 years. If you will be moving and need to take out a new loan, this will be an expensive problem. It’s also a problem if you want the loan to be paid off early. So be sure to determine those pre-payment penalties and again, measure them against your monthly savings.
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.
Home refinancing can be a great way to cut down on your monthly expenses, and also give you some spending money if you need it. But doing it at the wrong time and under the wrong conditions can cost you money that we’re sure you don’t want to give away. Always check your savings against any fees and penalties, as well as other factors such as a potential move. If everything checks out in your favor, don’t just go with the first offer you receive. Shop around. You’ll be surprised at the difference in rates in terms that exist. And get recommendations from friends and relatives as well.
Good decisions can be extremely beneficial to your financial well being.
Did you know you can even refinance your mobile home or improve your financial condition with a manufactured home refinance? Learn about these methods and other house refinance information by visiting www.home-mortgage-refinancing-loan.com.
Refinance Dangers – What You Need to Know Before Refinancing!
July 5th, 2009 by adminRefinancing your mortgage could be a huge step to financial security and the road to wealth, but it could also prove to turn sour quickly and ruin your well being. The most common problem with bad and faulty refinances is the lack of knowledge by the homeowner. Information is key to realize when and how to refinance your loan in the correct way. If you do not attain a basic understanding of the process you are leaving yourself unprotected from being taken advantage of by a mortgage broker who is unethical or incompetent.
Bad mortgage refinancing is sometimes called churning. Churning happens when brokers will refinance a loan without financial benefits for the home owner just to gain commissions.
This does not at all mean that you should avoid mortgage brokers; you just need to have the confidence to know if you are being awarded a good or bad deal. The right broker can make your life very easy, and it is worth it to try a few companies before deciding upon your preferred option. Remember- knowledge is the key when looking for the best refinancing option, you can find all of the basic information about refinancing on this very site, as well as a list of accredited lenders that will compete for your business.
Another pitfall that many people fall into is using their personal bank as the lender that they go to first. This is usually a bad option due to the fact that banks will push their own products and generally the best option is not revealed. Asking what your bank is offering is never a bad plan but it will require going to a few companies to ensure that you are getting the best rate and options.
Home loan refinancing, just like many financial decisions, can offer an escape from many financial woes. Without attaining the right knowledge although, the dangers of refinancing can be very large and leave you in a worse mortgage condition. Make Sure that you know how to choose the right Mortgage Broker, and to know enough about the refinance and real estate market to make sure your refinance helps you financially in the long run.
