Is Refinancing Your Home a Smart Move for You?
Refinancing a home can be a smart move – if you time it well and understand the factors involved.
Refinancing means replacing your current mortgage with a new one, and doing so will result in a new rate, term and monthly payment. While refinancing does have some upfront costs, taking this step could improve your financial situation.
Reasons to Refinance Some of the best times to consider refinancing include:
• When mortgage rates are lower than the rate of your current mortgage. Even small di erences in mortgage rates can have a big impact on your monthly payment, and the total cost of your loan.
• When your financial situation has improved and you can secure a loan with a shorter term to build equity in your home faster.
• When your adjustable-rate mortgage is adjusting upward and you want to c onvert to a fixed-rate mortgage for the security of consistent payments.
• When you’ ve built up significant equity in your home and could use the money from a cash-out refinance for home improvements or to improve your financial situation. With a cash-out refinance, you’ re refinancing your mortgage for more than you currently owe. In return, you’ re getting a portion of your equity back in cash.
Key Factors to Consider
Although refinancing your mortgage could save you money in the long and short term, it isn’ t free. The total cost to refinance your mortgage will be determined by your lender, credit score and location. As a general rule, you can expect to spend 3-6 % of your loan principal on a refinance.
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