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a Good Idea?
Home Equity Loans
IS REFINANCING ALWAYS A GOOD IDEA?
Mortgage rates are lower than they have ever been. Refinancing
will help you save money nine times out of ten. However, you need to
be aware about when
refinancing does not make sense. If you refinance
your mortgage, and you fall into any one of the categorizes below,
you will lose money, not save.
Are you looking to sell your home soon?
If you are looking to sell your home in a few years, refinancing
does not make sense. Yes, you will save a few hundred dollars every
month if you refinance. However, you need to take into consideration
closing costs can be a few thousand dollars. It will take a few
years for the savings from refinancing to surpass the cost of the
credit score declined?
rating was perfect when you first purchased
your home. Over the past few years, you have experienced some
financial emergencies, like a job loss resulting in
not paying credit card bills on time. As a result, your credit score has declined
significantly, hurting your chances of achieving a lower a lower
mortgage rate through refinancing. Obviously, if you can not achieve
a lower interest rate than your current mortgage, refinancing does
not make sense at all.
Looking to save on interest? Having
difficulties paying your current mortgage?
Are you looking to save money in interest by refinancing a 30
year mortgage into a 20 year mortgage. Even though you will be
saving money over the entire of the loan, however as a result of the
increase in term, you are going
to be looking at a monthly payment that is higher than your previous
mortgage. So, unless you are anticipating an increase in
income, this type of refinancing does not make sense.
Have you already refinanced and received
cash-out? Do you need more money?
Have you recently refinanced and got some
cash-out of the equity
of your home for home
improvements. Do you need to refinance again to finish the job
that you underestimated in cost. If refinancing and getting cash-out
again leaves you borrowing more than 80% of your home's current
value, then you will be required to take out
PMI (private mortgage insurance).
PMI can cost you an additional $100 month. So,
you may want to consider applying for a
home equity loan instead of refinancing if you fall into this