Depending on your situation, the benefits of refinancing can be far reaching. Obtaining a loan with a lower interest rate and lower monthly payments can take the stress out of paying your mortgage. Managing a loan with the best possible terms will help you find more joy in your home and allow you to use the money you save in other pursuits, such as home improvement or college tuition. The money you save from refinancing may keep you from taking out more loans and incurring more debt. However, refinancing is not best for everyone.
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Homeowners making decisions about refinancing mortgages have many factors to
- Are interest rates significantly lower than they were when I closed my loan?
- Do intend to remain in my home for the next ten years?
- Do I have enough years remaining on my mortgage to make refinancing worthwhile?
- Do I want to switch from an adjustable rate to a fixed rate?
- Do I need a lower cap on my adjustable rate loan?
- Is my credit as good or better than it was with my first mortgage?
- Can I do better than the loan I currently have?
That last question is very important. If your credit is no longer as clean as it was when you first bought your home, refinancing could actually hurt you. If you have developed a large income to debt ratio, you may not be able to receive the low interest rate that has been tempting you to look into refinancing. You may also want to check your credit report to ensure that there are no false claims that could keep you from getting that rate that you want.
If you dont intend to live in your house for ten more years, you may not want to refinance. You may not fully be able to appreciate the benefits of refinancing within that time and might want to consider looking into a different kind of loan, perhaps a home equity loan. However, truly significant rate drops can make refinancing a good choice even if you are moving before ten years have passed.