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Three Benefits of Refinancing Your Mortgage
Author David Schneider | Jan 07,2008
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Did you know that you aren't locked into the terms of your current mortgage? You can refinance your mortgage, often to your benefit. Refinancing can help you get a lower interest rate, consolidate debts or adjust to a fixed rate.Refinance Your Mortgage to a Lower Interest RateInterest rates are constantly adjusting. Sometimes they are high, and eventually they fall. When interest rates are falling is a good time to consider refinancing. A lower interest rate lowers your monthly mortgage payment and ultimately makes your home more affordable. How much you save depends on the interest rate reduction you receive, along with the length of time you stay in the home. In general, refinancing is worth considering when the interest rate you can receive is one percent lower than your current rate.To determine if refinancing to a lower rate is worthwhile, you first need to determine your closing costs. A new mortgage requires the same fees as when you took out the first loan. Usual costs include the appraisal, title and escrow fees. Visit several brokers to find the best rate.Once you know your closing costs, divide them by the new monthly mortgage payment savings. The result is the number of months you will need to live in the house to recover your closing costs. If you plan to live in your home longer than it will take to recover the closing costs, then refinancing is worthwhile.Refinance Your Mortgage to Consolidate DebtsAnother benefit of refinancing is the ability to roll other debts into your new mortgage. If you have accumulated a lot of debt on high interest credit cards, paying them off and rolling the balances into your mortgage could save you a lot of money. Credit cards aren't the only debts you can consolidate. Just about any consumer debt qualifies. This includes your car loans and college debt.Refinance Your Mortgage to Get a Fixed Interest RateIf you currently have an adjustable rate mortgage (ARM), refinancing before the rate goes up could save you a lot of money. In some cases, this could even help you avoid foreclosure, especially if you have a teaser low rate that is set to jump to a much higher rate soon. Refinancing to a fixed rate mortgage may raise your monthly payment in the near term, but over the long term, you'll save money with a fixed rate mortgage.
Did you know that you aren't locked into the terms of your current mortgage? You can refinance your mortgage, often to your benefit. Refinancing can help you get a lower interest rate, consolidate debts or adjust to a fixed rate.Refinance Your Mortgage to a Lower Interest RateInterest rates are constantly adjusting. Sometimes they are high, and eventually they fall. When interest rates are falling is a good time to consider refinancing. A lower interest rate lowers your monthly mortgage payment and ultimately makes your home more affordable. How much you save depends on the interest rate reduction you receive, along with the length of time you stay in the home. In general, refinancing is worth considering when the interest rate you can receive is one percent lower than your current rate.To determine if refinancing to a lower rate is worthwhile, you first need to determine your closing costs. A new mortgage requires the same fees as when you took out the first loan. Usual costs include the appraisal, title and escrow fees. Visit several brokers to find the best rate.Once you know your closing costs, divide them by the new monthly mortgage payment savings. The result is the number of months you will need to live in the house to recover your closing costs. If you plan to live in your home longer than it will take to recover the closing costs, then refinancing is worthwhile.Refinance Your Mortgage to Consolidate DebtsAnother benefit of refinancing is the ability to roll other debts into your new mortgage. If you have accumulated a lot of debt on high interest credit cards, paying them off and rolling the balances into your mortgage could save you a lot of money. Credit cards aren't the only debts you can consolidate. Just about any consumer debt qualifies. This includes your car loans and college debt.Refinance Your Mortgage to Get a Fixed Interest RateIf you currently have an adjustable rate mortgage (ARM), refinancing before the rate goes up could save you a lot of money. In some cases, this could even help you avoid foreclosure, especially if you have a teaser low rate that is set to jump to a much higher rate soon. Refinancing to a fixed rate mortgage may raise your monthly payment in the near term, but over the long term, you'll save money with a fixed rate mortgage. |
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