When refinancing your mortgage, you must look at the big picture to see if it really makes financial sense for you. Since rates are at an all time low, many people are considering it. Here are some ways to help you decide if it will benefit you or not.
If you have plans to pay off your mortgage in the next few years it makes no sense for you, as you will not be able to recover the re-financing fees in time. Same thing goes if you are planning to move in the next few years. A good rule of thumb is if you plan on moving in the next 3 years, don't refinance.
If you are planning to stay in your home for many years and currently have an Adjustable Rate Mortgage, then refinancing to a 30-Year Fixed is a very good option for you. Refinancing may not lower your monthly payments by all that much, but you may sleep better knowing that those payments will never go up.
Another good reason to refinance is if you are currently paying a very high rate. A very good rule of thumb is to calculate your costs and make sure that you can earn back the roughly $2,000 in fees that you will pay, within two to three years.
Two other things to consider are that if you are paying less interest over time, you will pay more taxes. Also, money that you pay in refinancing fees could be invested instead. Think of the return on that sum you could earn over thirty years! But if you need the additional disposable income right now, then refinancing may be the best option.
If you have an adjustable rate that can increase more than 1 percentage point in any given year, refinancing may be a good option while rates are low. There are several adjustable mortgages out there that can adjust 2 point in one year and a maximum of 5 over the life of the loan. Most home owners enjoyed the low tickler rate they received when they applied for the original loan, but would be devastated if the rate ever increased up to the maximum of 5% over the original amount.
Bottom line is that rates will be lower in 2009. Plan as if the worst case scenario could happen and then make your decision about whether to refinance from there. If you have questions, please contact me and I will be happy to respond to you about your individual situation.
A Question Many Homeowners in Wasilla Are Asking Themselves: Should We Refinance?
When refinancing your mortgage, you must look at the big picture to see if it really makes financial sense for you. Since rates are at an all time low, many people are considering it. Here are some ways to help you decide if it will benefit you or not.
If you have plans to pay off your mortgage in the next few years it makes no sense for you, as you will not be able to recover the re-financing fees in time. Same thing goes if you are planning to move in the next few years. A good rule of thumb is if you plan on moving in the next 3 years, don't refinance.
If you are planning to stay in your home for many years and currently have an Adjustable Rate Mortgage, then refinancing to a 30-Year Fixed is a very good option for you. Refinancing may not lower your monthly payments by all that much, but you may sleep better knowing that those payments will never go up.
Another good reason to refinance is if you are currently paying a very high rate. A very good rule of thumb is to calculate your costs and make sure that you can earn back the roughly $2,000 in fees that you will pay, within two to three years.
Two other things to consider are that if you are paying less interest over time, you will pay more taxes. Also, money that you pay in refinancing fees could be invested instead. Think of the return on that sum you could earn over thirty years! But if you need the additional disposable income right now, then refinancing may be the best option.
If you have an adjustable rate that can increase more than 1 percentage point in any given year, refinancing may be a good option while rates are low. There are several adjustable mortgages out there that can adjust 2 point in one year and a maximum of 5 over the life of the loan. Most home owners enjoyed the low tickler rate they received when they applied for the original loan, but would be devastated if the rate ever increased up to the maximum of 5% over the original amount.
Bottom line is that rates will be lower in 2009. Plan as if the worst case scenario could happen and then make your decision about whether to refinance from there. If you have questions, please contact me and I will be happy to respond to you about your individual situation.
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One Comment
There is obviously a lot to know about this. I think you made some good points in Features also.