Many people are doing it, but should you? Getting a new mortgage to replace the old one could be very sound advice ? but not every time. Here are some things that you could gain if you refinance your mortgage.
Lower Interest Rates
One of the best reasons to refinance is to be able to get a better interest rate and lower your monthly payments. This, of course, leads to more savings. Since the interest rates on mortgages changes every day, it is always a good idea to keep one eye on those changes. When the interest rates drop more than 1% lower than what you already have, it is one indication that you can save some money.
Save Some Money
The amount of money you can save by a lower interest rate, however, is not all that can be gained. In fact, you could save much more if you also reduce the amount of time left to pay off the mortgage. By keeping your payments about the same and shortening the time by at least five years, you could save additional tens of thousands of dollars more.
Get Your Equity
At the same time that you refinance your mortgage, you can also get access to some of your equity. A cash out mortgage refinance will enable you to get your equity and provide the cash you may need for that home project, or other need.
Be sure that you leave at least 20% of you home?s value in the equity ? don?t take it out. This way, you will not need to get private mortgage insurance. It will also enable you to have a reserve cash supply, just in case you need to move later.
Obtain Level Payments
If you currently have an adjustable rate mortgage that is about to become adjustable in its payments, you may need to quickly refinance in order to reduce your risk. When the rates go up ? so will your payments, but you can refinance to a more stable fixed rate mortgage. If you wait too long to refinance, you could be stuck with the interest rates that the market will force you to have ? whether you have adjustable rate or fixed rate.
Calculate Your Options
It is important that you take some time and make some serious calculations. You should not refinance just because your friends are, or your neighbors. Your situation could be (and probably is) different from theirs.
Once you have determined that you are going to stay for at least another 3 to 5 years, you should calculate the different options available and see which ones are most profitable. Some mortgage types may not be suitable for you to get a good deal on, but you will need to look them over first to find out which ones will give you the greatest benefit and savings.
Be sure to get quotes from different lenders and then compare them. Refinancing your mortgage is something you cannot do very often, because of the cost ? so get the best one you can.
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