Refinancing can have other financial benefits besides lowering
rates. Locking in rates can protect you from higher rates,
saving you money on future interest costs. You can also change
your ARM for better caps to prevent huge monthly increases.
Consolidating your bills with your equity saves on credit card
rates while providing a tax advantage.
Protection From Future Rate Hikes
An adjustable rate mortgage (ARM) provides the lowest rates for
home buyers, but these rates can increase. Monthly payments can
jump a couple of hundred dollars a month depending on market
rates and loan caps.
For those planning to stay in their home for more than seven
years, it is a good idea to refinance to a fixed-rate mortgage
if rates look likely to rise. Fixed-rate mortgages offer
security from future payment hikes, but with slightly higher
rates than ARMs.
Trading In For Better Caps
Many ARMs offer initial low set rates that can change after a
couple of years. Jumps in payments can be surprising, especially
if you have less than favorable caps. Caps set limits on how
much and how often your payments can increase.
Refinancing your ARM can help you negotiate lower caps. You can
also find an ARM with set rates for several years, just like
with your original mortgage.
Helping To Pay Off Your Loan
Early payment of your home loan saves on interest costs. For
those you need a structured approach to make larger payments,
refinancing for a shorter term may be the answer.
For instance, exchanging your 30 year mortgage for a 15 year
mortgage can reduce your interest costs by almost half, even at
the same rate. Even with the origination costs, early payment
will still save you money.
Taking The Tax Advantage
Mortgage interest is tax deductible, unlike interest on other
bills. Cashing out part of your equity to pay off bills can give
you a financial edge to get ahead. Be sure to make refinancing
part of your larger financial goals to enjoy the full benefits.
Investigating Lenders
Investigate lenders before you sign a contract to be sure you
are getting the best financial offers. Ask about their APR to
get a true understanding of the loan costs. Many financial
companies post this information online, or you can request near
instant quotes.
About the author:
View our recommended mortgage re fi lenders.
Written by: Carrie Reeder
(114)Home Mortgage Refinancing - should I
refinance?
Why should I refinance and when does it pay to do so?
Refinancing can be worthwhile, but it does not make good
financial sense for everyone. A general role of thumb is that
refinancing becomes worth your while if the current interest
rate on your mortgage is at least 2 percentage points higher
than the prevailing market rate.
There are several reasons to refinance your home:
1. To lower the interest rate on your mortgage, reducing your
monthly payments and overall cost;
2. To reduce the term or length of your loan, doing so can save
you thousands of dollars in interest;
3. To provide a means of consolidating your debt;
4. To draw on the equity built up in the house to get cash for a
major purchase or for children's education;
5. Have an adjustable-rate mortgage (ARM) and want a fixed-rate
loan to have the certainty of knowing exactly what the mortgage
payment will be for the life of the loan.
It is better to refinance if you can get an interest rate at
least two percentage points lower than what you are currently
paying. However, every situation is different. Some lenders are
offering reduced fees or no points. Asking yourself a few
questions may help you determine if you can save money:
1. How much can I lower my current monthly payment? 2. How much
will I pay in refinancing costs? 3. How much will I still owe on
the house? 4. How much am I currently paying each month? 5. How
much did I initially pay for the house?
There are other considerations, too, such as how long you plan
to stay in the house. Most sources say that it takes at least
three years to realize fully the savings from a lower interest
rate, given the costs of the refinancing. Itemize all the
expenses of the refinance and estimate your new monthly
payments. Answering these questions can help you to decide if
you should refinance.
Talk with mortgage lenders, real estate agents, attorneys, and
other advisors about lending practices, mortgage instruments,
and your own interests before you commit to any specific loan.
About the Author
Copyright © 2009. Chileshe Mwape writes for the Mortgage Lenders
website at http://banks.lending-guide.org/ and he's also a
regular contributor to the Auto Loans website at
http://www.motor-car-loans.org.uk/
Written by: C Mwape
When you refinance your home mortgage, lenders often tempt you
with the option of cashing out part of your home’s equity. Cash
at a comparably low interest rate may seem like a good option,
but make sure you will financially benefit from it first.
Raising Your Home’s Value
Only some home improvements raise the value of your home.
Bathroom and kitchen upgrades are one example of this. However,
with most remodel jobs, you will not see a financial gain. If
you are using your home’s equity to fund projects, make sure
that your investment will pay off.
Saving On Interest Payments
Paying off credit cards with your home’s equity will save you
money in two ways. First of all, you will save on interest
payments. Secondly, the interest you pay on your mortgage is tax
deductible, unlike credit card interest.
PMI Penalty
Private mortgage insurance kicks in if you borrow more than 80%
of your home’s value. These extra payments can add up to several
hundred dollars a year, so be careful how much you borrow. Other
lines of credit may be more cost efficient when you factor in
the cost of PMI on your mortgage.
The Length Of The Loan
While it may see smart to take out equity at a low interest rate
with your mortgage, it may be cheaper to cash out through a home
equity loan. Home equity loans allow you to deduct interest
payments from your taxes, but they require a shorter repayment
period.
Interest rates on a home equity loan are higher, so you will
need to compare the costs between refinancing and a home equity
loan. Generally, if your mortgage is long-term, a home equity
loan is a better deal.
Your Financial Situation
To decide whether to cash out the equity of your home, you have
to make decisions around what is best for your financial
situation. There are no hard rules for this type of decision.
For example, purchasing a car with your home’s equity may be a
wise investment if you need a car and would struggle with a car
payment. In the end, financial decisions are about making
trade-offs.
About the Author
Carrie Reeder is the owner http://www.abcloanguide.com an
informational website about various types of loans. To view our
recommended sources for refinance mortgage loans online, visit
this page:
http://www.abcloanguide.com/refinance.shtml
Written by: Carrie Reeder
:(116)Home Mortgages and Refinances
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About the Author
I write articles for www.mortgageease.com.We're a full-service
mortgage company that specializes in providing residential
loans--for borrowers with all types of credit histories.
Written by: mortgageease