Reasons to Refinance Your Mortgage
Posted on March 3, 2010 in the mortgage refinance category
Reasons to Refinance Your Mortgage
A typical mortgage runs for 30 years, but not too many American stick to their loans for long. In fact, according to the Mortgage Bankers Association (MBA), an average American homeowner refinances his or her loan every four years. That’s because paying the existing loan and taking a new one can mean lots of savings over the course of time. Nonetheless, refinancing your mortgage has a price and can be a costly move if short term goal is desired. Thus, it is crucial to know exactly the reason why you should refinance.
To switch from ARM to FRM ? Mortgage companies may offer adjustable rate mortgages with fixed rate mortgage for the first few years of the loan. Meaning, if you have applied for a loan under ARM, the amount of your monthly dues is fixed during the first years (the number of years depends on the agreement).
Often, the rates are really low which make it more attractive. However, once the “FRM period” expires, fluctuating rates may prove to be stressful and disadvantageous. If you have initially taken an adjustable rate mortgage and would like to switch to a 15-, 20- or 30-year FRM, you may pay higher interest but gain the confidence of knowing what your actual payments would be every month for the rest of your loan.
To get emergency cash ? Your home is your asset. And any amount of equity you have built over the years is like money stored in your savings account. Through mortgage refinancing, you can tap these savings and get the cash to finance any immediate need. The cash from your home can be used to pay for college tuition, pay off credit card bills, consolidate debt, take a vacation, replace your current car or increase the market value of your home through home improvements.
To get lower rate ? While other factors such as your credit score and your down payment for the house influence the monthly mortgage payment, interest rate is still the single, most important factor that drives your monthly payment to either go up or down. Interest rates though are dictated by market forces. For this reason, rates fluctuate. And if the Federal Reserve cuts on rates, the prevailing rate at the time you bought your house may be significantly higher than what is being offered at the moment. At this point, it is wise to refinance your home. Taking a new loan with a lower rate will mean lower monthly payment.
To reduce monthly payment ? Aside from taking a loan with lower rates to reduce monthly payment, extending your loan for another several years would mean lower monthly payment. This, of course, equates to you paying a significantly higher total amount of loan over the same property, but if you are willing to stay in your home forever, this may be a good move.
To pay down the mortgage quickly ? Sure, your monthly payment will go up, but you will definitely save on interest rates. Taking a new, shorter loan definitely builds your equity faster which will let you own your property in shorter years.
Refinancing your mortgage is a bold move. Not only will you put your house on the line, you will also place your financial standing on a shaky ground. It is not enough to have a concrete reason alone, make sure that you also have a permanent source of income to pay your mortgage before making any action.
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13 Responses to “Reasons to Refinance Your Mortgage”
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There are many things to consider regarding refinancing a mortgage. BTW, thanks for this helpful information.
hello,this post is so grate.
Refinancing is similar to a key to a buried treasure. If it fits your financial situation, it can lead to some significant financial rewards. Consider some of the top reasons why many people refinance, and unlock the power of your home’s equity.
thanks for sharing.
Great Post, I will have to admit that I really agree with the interest rate part. That is the most determining factor in the mortgage going up or down which is something that most people do not understand.
I really like the nuance shown here in this article. There are a lot of factors involved in refinancing, and often it isn’t as clear cut as most people would think.
Obviously if you’re paying a ridiculous interest rate currently (over 7% or so), then refinancing likely will always be a good option (unless your mortgage balance is low I suppose).
Another factor to consider is that you start the amortization table all over again. This can be rather annoying, and mentally tough to get over.
The difference between credit card debt and a mortgage can, financially speaking, mean thousands of dollars, why?
Refinancing does have a lot of advantages. It can have a great impact on a homeowner’s payments, even short term in the right circumstances.
right now it is going to be extra hard to find some one to refinance your home — i would rather see you gather all the family around the table and say for the next 12 months we are going to get out act together and get out finances in order and to do that we are going to down size — we are just keeping what we need and nothing we want — such as interent service — cable tv — cell phones — and any other nice but not required items — i am sure you could save enough to get your selves back on your feet!!!
This post gives a lot of advice on whether one should get refinancing or not!Glad you pointed out some great ideas on this topic!!!!
The banks are tight right now, I have heard of Real Estate agents, that have lost sales, because the banks could not finance the transaction. It is really important to focus your money on what is needed.
Interesting take on this issue. I for one have seen quite a few
twists on this and can usually spot the holes inside the arguement on the other hand, on this occasion I belelive your writing is such that every person must be in agreement with this. Thank you for sharing it with us.
For long term, today, the historic low interest rates make a lot of sense. The fees to refinance may not be worth it for short term. Rates today make a refinance very attractive.
Thanks for sharing wonderful information.Its help to cut down the amount of monthly payment that you make for your loan.
Nice write up. The rates are really low which make it more attractive.