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When To Consider Refinancing Your Mortgage

Posted by  on Feb 08, 2010
 

People refinance their existing mortgage for serveral reasons,the most important being to take advantage of lower interest rates which will reduce their monthly mortgage payments or to help elimiate debt by using the equity in your home. Refinancing a mortgage means paying off your old mortgage and signing a contract for a new loan.

To consider refinanacing, you should ask yourself the following:

1. How long do you realistically plan on living in your existing home? Since refinancing does cost money (closing costs, etc.) if you are only planning on staying in your home a short while the money you might be saving on your monthly payment might be offset by the monies you spent to refinance. Also, if you are only going to be in your propery for a short-term it might be worthwhile to check out the many adjustable rate programs which are available.

2. Are you looking for a shorter-term mortgage to pay off your property quicker and saving potentially thousands of dollars in interest payment over the life of your loan?

3. Does your existing mortgage company have incentives if you refinance with them? If your mortgage is less than 12 months old, you may be able to save on some fees like the appraisal.

4. Should you refinance and borrow more money than you need to pay off the first mortgage to use to pay down other debts (student loans, credit cards, etc.)?

5. What is the interest rate on your current mortgage and what is the interest rate you could receive if you were to refinance? The old rule of thumb was to look for a 2% difference between your current mortgage and new mortgage. This rule my no longer apply.

6. Are there any tax implications in refinancing your existing loan?

7. Are you looking for a shorter-term mortgage to pay off your property quicker and saving potentially thousands of dollars in interest payment over the life of your loan?


And please remember to always ask for a Good Faith Estimate (GFE) which is helpful in doing educated comparison shopping. You should always ask for Good Faith Estimate (GFE) before moving forward with any decision. Check with your state banking departments to find out just how reputable the lender is that you are considering.

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