Refinancing a mortgage is one of the most crucial decisions a homeowner can make. And unless you have been living under a rock, there are many reasons you should go for refinancing: there is an opportunity for obtaining a lower interest rate; a shorter term on the mortgage; the opportunity to turn home equity to make a larger purchase; or the simple desire to consolidate debts. However, as enticing as it may sound, there are 2 important factors to keep in mind before you decide on getting a refinance on your existing mortgage:
• Refinancing can cost anywhere between 3% to 6% of the loan’s principal
• It requires appraisal, title search and application fees to be paid
According to Dan Green, the Chief Publishing Officer at the Mortgagereports.com, The trend from 2014 will carry on and mortgage rates will continue to drop due to a continued economic weakness. Which essentially means, that if you have been considering getting a mortgage refinance; this might be the ideal time to do it. Below we will take a closer look at what’s in store for you, should you decide in the positive.
Securing loans at a lower interest
This is the prime reason why people actually opt for mortgage refinancing in the first place. One of the bitter truths of life is that no one likes paying a higher interest rate and should they get an opportunity to reduce that burden, they will willfully do so. The basic rule of thumb here is to ensure that you can at the least, reduce your interest rates by 2%; however, with the changing scenario, even a 1% saving could make a lot of difference to your finances. Reducing the monthly interest rate will not only save you money in the long term, but it will also help you build a solid equity in your home and help you cut down on your monthly payments. Just to help you decide on the best rates you can get on your mortgage refinance, you can visit Property Guru and check out a host of deals that are currently on offer by multiple banks. And while you are at it, remember the golden rule, maximize your savings and cut down on your monthly payments.
Shortening the term duration
Refinancing your mortgage also gives you the opportunity of shortening the duration of your loan without taking a significant hit on your pocket. There are options; wherein, you can literally cut down the loan repayment period from 30 years down to just 15 years. With just a few more dollars in monthly payments you could, in essence, free yourself from the burden of having to carry debt on your head for a longer period of time.
Consolidating Debt
Refinancing can also help you consolidate debt, and there are multiple ways in which it can help you: you can pay off credit card dues; pay for college for your kids; remodel your house, or simply make a high-cost purchase like a car with the available credit. But as enticing as it may sound, financial experts warn against making hasty decisions. To make the best use of the lower interest rates and a shorter duration, it’s important that you keep your other expenditures in check. Say for example, you use the extra pool of cash to pay off your credit card dues; it’s important that you do not max them out again, as doing so will result in an additional burden on your finances and would nullify the advantages that refinancing brings with it. Since then, you would be paying off that mortgage in addition to the higher interest rates of a credit card. The point is to keep yourself in check to completely benefit from refinancing your mortgage.
Are there any Risks?
When you decide to refinance your existing mortgage, you need to keep in mind that there are penalties which you might need to incur, and these can ideally run into thousands of dollars. It would serve you best if you first check whether or not your refinancing agreement takes care of this fee before you sign on the dotted line. Refinancing also calls in for a lot of paperwork, many of which would prompt you to hire an attorney to ensure you get a fair deal. Therefore, if you are unwilling to bear the additional cost of having to hire an attorney; it’s best if you seek out either a free refinancing offer or offers with a lower fee.
If you have been struggling to pay off the high-interest rates on your mortgage, refinancing can serve as your ideal option to cut down on your monthly payments and ensure that you are able to secure a better future for your family while building equity in your home. So if you are still to apply for that mortgage refinance, the time is now!