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Should You Refinance?
There are several reasons that might make someone consider refinancing their existing mortgage. One would be to get a lower interest rate than what they currently have, thereby reducing monthly payments and lowering the overall cost of the mortgage. Another is to shorten the length of the loan, which can save quite a bit in interest payments. Thirdly, someone may have other debts that they wish to pay off, and refinancing may provide them a means of consolidating that debt into one overall lower payment.
A lower interest rate isn't the only thing that should be taken into account when thinking about refinancing. There are costs and fees associated with refinancing your mortgage. The bank will charge fees, there will be costs for a new inspection and a new appraisal, title search, and so on. The process that is gone through is very much like the process that one goes through on getting a first mortgage. It requires a new application with a new credit check, survey, and sometimes an appraisal. As it is with a first mortgage, this can be a long and costly process.
In general, it makes sense to refinance if the interest rate on the new loan is at least two percentage points lower than that of the current loan, although this is not always the case. Some things that need to be taken into consideration are the total cost of the refinancing, the total monthly savings, and how long you plan to stay in your house after you refinance. You can calculate how long it will take you to break even on refinancing costs by dividing the total cost of the refinance by the monthly amount you will be saving. For example, if the cost is $2,500, and you reduce your monthly payments by $100, then it will take 25 months to start seeing the savings from the reduced mortgage rate. If you plan on staying in your house longer than this, then it may just make sense for you.
Another reason that someone might consider refinancing is if they are trying to consolidate debt. In such cases, there is also the tax impact that one should look at. Many loan types are not tax deductible, whereas mortgage loans are. Therefore for that reason alone it may be a good idea to consolidate outstanding credit card debt, student loans, car loans, as well as others.
Some people may not have a choice about refinancing, it is a must for them. This happens in cases where they have a loan with a balloon payment coming up and no conversion option. In instances like this the best bet is to refinance the mortgage a few months before the balloon payment is due.
If you do decide that the costs associated with doing a refinance outweigh the benefits, you should ask your bank or financial institution if you can get some of the terms that you want by agreeing to a modification of your current loan. However you choose to go, remember that it always makes sense to consult with a mortgage professional before making your move. This can end up saving you both time and money. You should also do research before making a decision. Spend some time on the web familiarizing yourself with what you are getting yourself into. Take the time to read up on and understand what your options are.
More on Mortgage Refinancing.
MORE RESOURCES updated Wed. September / 23 / 2020
Refinancing Your Mortgage Is About to Get More Expensive The Wall Street Journal
How to refinance your mortgage in 5 easy steps Fox Business
A record number of borrowers can now save on a mortgage refinance, as rates set another historic low - CNBC
A record number of borrowers can now save on a mortgage refinance, as rates set another historic low CNBC
Mortgage lenders are adding the refinancing fee. You can still avoid it if you act now. - Bankrate.com
Mortgage lenders are adding the refinancing fee. You can still avoid it if you act now. Bankrate.com
How to refinance your mortgage without closing costs Fox Business
How often can you refinance your mortgage? Fox Business
Mortgage and refinance rates today, September 15, 2020 | Mortgage Rates, Mortgage News and Strategy - The Mortgage Reports
Mortgage and refinance rates today, September 15, 2020 | Mortgage Rates, Mortgage News and Strategy The Mortgage Reports
How to Lower Your Monthly Mortgage Payment: Guide Credible News
Refinance your home before December 1 to avoid paying a new fee Business Insider
How and Why to Refinance Your Mortgage: A Step-By-Step Guide ActionNewsJax.com
Mortgage Refinance Calculator Clark.com
Should I refinance my mortgage? A financial planner explains Business Insider
When Should I Refinance With a No Closing Cost Mortgage? Clark.com - Clark Howard
Today's best mortgage and refinance rates - Tuesday, August 25, 2020 Business Insider
What to consider when retiring and refinancing your home Washington Post
Clark Howard’s Special Rule for Refinancing Your Mortgage Clark.com - Clark Howard
15-year mortgage rate hits new record low Bankrate.com
Millennials drive huge VA home loan refinance boost in Hampton Roads - The Virginian-Pilot - Virginian-Pilot
Millennials drive huge VA home loan refinance boost in Hampton Roads - The Virginian-Pilot Virginian-Pilot
Seven Out of 10 Homeowners Who Research Refinancing Get Unwanted Sales Pitches: Survey - Credible News
Seven Out of 10 Homeowners Who Research Refinancing Get Unwanted Sales Pitches: Survey Credible News
What You Should Know About Non-Bank Mortgage Lenders The Motley Fool
Pontiac's United Wholesale Mortgage to go public with Gores Group The Detroit News
New Fed policy could mean years of low mortgage rates | Mortgage Rates, Mortgage News and Strategy - The Mortgage Reports
New Fed policy could mean years of low mortgage rates | Mortgage Rates, Mortgage News and Strategy The Mortgage Reports
Refinanced Your Mortgage? 8 Things to Do With the Savings The Motley Fool
The Median U.S. Home Value Has Reached a Record High -- and That's Bad News for Buyers - The Motley Fool
The Median U.S. Home Value Has Reached a Record High -- and That's Bad News for Buyers The Motley Fool
Mortgage refinance: Everything you need to know Fox Business
How to get the best mortgage refinance rates Fox Business
10 things to know before refinancing your mortgage Fox Business
When should you refinance your mortgage? Fox Business
Colliers Mortgage Closes Fannie Mae Loan for Acquisition Financing of 129-Unit The 10Forty8 Modern Living Community in Seguin, Texas - MultifamilyBiz.com
Colliers Mortgage Closes Fannie Mae Loan for Acquisition Financing of 129-Unit The 10Forty8 Modern Living Community in Seguin, Texas MultifamilyBiz.com
Fannie's Forecast Sees a Brightening Recovery Mortgage News Daily
Compare Today's Mortgage Refinance Rates: Sep 22 Credible News
Why Warren Buffett would say to refinance your mortgage now Wall Street Reporter
How to get a low-cost mortgage refinance Bankrate.com
Mortgage refinancing is about to get more expensive Pittsburgh Post-Gazette
How does mortgage refinancing work? Bankrate.com
10 ways to save money on a tight budget Bankrate.com
Refinancing Your Mortgage? Those Rock-Bottom Interest Rates Aren’t for You - The Wall Street Journal
Refinancing Your Mortgage? Those Rock-Bottom Interest Rates Aren’t for You The Wall Street Journal
Should you refinance your mortgage? Tennessean
2021 Mortgage rate forecast predicts a rise to 3.3% by 4Q 2021 National Mortgage News
Mortgage refinance applications spike 79% as homeowners rush to take advantage of lower rates - CNBC
I refinanced my mortgage during COVID-19, and thanks to low interest rates I'll save about $50000 - Business Insider
I refinanced my mortgage during COVID-19, and thanks to low interest rates I'll save about $50000 Business Insider
Rushing to Refinance Your Mortgage: 6 Tips and What to Avoid The New York Times
What Is a Mortgage? Everything to Know About Home Loans Credible News
Record number of borrowers can now save on a mortgage refinance as rates drop from coronavirus fears - CNBC
Record number of borrowers can now save on a mortgage refinance as rates drop from coronavirus fears CNBC