Should You Choose to Refinance?

 


Visitors: 1,017
 1 vote

Refinancing has become a valid option for many individuals with high interest rates on their mortgage. Refinancing is essentially a replacement loan, with a different lender and (hopefully) a lower interest rate.

So why would you choose to refinance?

  • You may be able to take advantage of lower interest rates.

  • You may also be able to extend the repayment period of your mortgage. While you will end up paying more in interest charges for this, this will reduce your monthly outgoings.

  • You may be able to switch from a variable rate to a fixed rate mortgage, giving you greater security in the future from potential rate increases.

  • You may also be able to increase the amount of your mortgage, to pay off other, higher interest rate liabilities such as credit card debt, cell phone debt and personal loan debt. This will enable you to save money on interest rate charges

Why would you avoid refinance?

If you decide to borrow more than your existing mortgage, you need to be wary of your budget. If you default on your payments you run the risk of losing your house.

If you do not calculate the costs involved with refinancing correctly, you could end up paying more in interest charges.

Thoroughly review the contract of your existing loan, an early pay out could involve a penalty that would negate the benefits of refinancing.

What will it cost me?

Refinancing does carry some costs that you need to be made aware.

  • Valuation Fee – This is the fee for a professional appraisal of the value of your house.

  • Credit Report – An assessment of your credit health

  • Escrow – Fee for money transferred by a third party.

  • Lender Fees – Any other fees that are incurred by using a particular lender

Am I eligible?

Applying for mortgage refinance is just like applying for another loan. There is a set criteria for acceptance. Every missed mortgage payment will count against you in the application, either resulting in a greater interest rate or a refused application.

Should I choose refinancing?

You will need to assess your current mortgage and the changeover costs and savings to ascertain whether it will be of benefit to you. There are specific refinancing calculators that can help you determine the net gain. The best one that I have found is here http://www.calcbuilder.com/cgi-bin/calcs/HOM12.cgi/

As a rule of thumb many lenders advocate that a 1% gap between your current interest rate and a refinance rate makes refinance a worthwhile option. Always make sure to speak to a financial professional before deciding to refinance your mortgage.

About The Author

Brad Slade

More information on mortgage refinance available at http://members.optusnet.com.au/~mortgagearticles/

(520)

Article Source:


 
Rate this Article: 
 
Mortgage Refinance for People With Bad Credit – How Much Equity Do You Need ..
Rated 1.0 / 5
based on 1 vote
ArticleSlash

Related Articles:

Home Mortgage Refinance Loan - Choose a Loan, Not a Lender, When Refinancing

by: Louie Latour (January 21, 2007) 
(Real Estate)

Auto Loan Refinance - Refinance the Car Dealerships Profits Out of Your ..

by: Justin Reynolds (August 11, 2008) 
(Finance/Auto Loans)

North Dakota Refinance Loans – Using Online Resources to Refinance Your Loan

by: Jane A. Hale (November 20, 2006) 
(Real Estate)

Best Refinance Mortgage Rate Cash Out Refinance Home Loan Online

by: FrankW Ellis (January 16, 2007) 
(Real Estate)

Refinance an Adjustable Rate Mortgage - Should You Pay Points When You ..

by: Darin Sewell (July 30, 2008) 
(Finance/Mortgage Refinance)

Auto Refinance Secrets: Refinance Your Car Loan and Save Every Month

by: Christopher Luck (November 30, 2005) 
(Finance/Loans)

Refinance an Adjustable Rate Mortgage - Five Home Refinance Tips to Make Your ..

by: Darin Sewell (September 25, 2008) 
(Finance/Mortgage Refinance)

Equity Home Refinance - Discover the Balance Refinance mortgage loan relating ..

by: Johnson Smth (December 16, 2011) 
(Insurance/Home Owners Renters)

Connecticut Refinance Loans – Using a Cash-Out Refinance to Purchase a Second .

by: Jane A. Hale (November 27, 2006) 
(Real Estate)

Mortgage Refinance for People With Bad Credit – How Much Equity Do You Need ..

by: L. Sampson (July 26, 2006) 
(Finance/Mortgage Refinance)