There may come a point in time where you will want to refinance your home, especially if you are trying to save money on your monthly mortgage. However, refinancing doesn't always make sense. Here are three ways to determine when it does:
You Will Actually Save Money:
You don't want to refinance your home if it isn't actually going to save you money. Although you may be able to get your mortgage rate down, this doesn't always mean that you are saving. This is because there are many instances in which a lower mortgage rate often means that you have to agree to a larger loan term or a higher interest rate. Over time, you will actually be spending more than you currently are. Many homeowners regret making this decision because it straps you down financially even more. If you must do this to lower your monthly costs because you have lost a job or are tight financially for other reasons, you should still attempt to make slightly higher payments each month to pay the loan off sooner and not pay as much interest.
You Have a Better Credit Standing:
When you purchased your home, it's important to know where your credit standing was at that point. If your credit was in the 600s or lower and you have recently gotten it up to 750 or up, then refinancing is probably going to lead to a better loan outcome than you currently have now. This is especially true if you have been making your payments on time and haven't missed any payments up to this point.
The Interest Rate Will go Down:
One of the main reasons to refinance is to get that interest rate down. The less interest you are paying the better. This is because the interest on your home makes your monthly payments higher and leads to you spending more on your home than the actual value of the home itself. If your interest rate was high when you first applied for your mortgage, it's best to make higher monthly payments if you can in order to pay less interest over time. Once your credit is higher, then you can refinance to get the interest rate lowered and your monthly costs down, as well.
When you know these three ways to determine when home refinance makes sense, you can make the smartest decision when it comes to paying off your home.
When I started my own company, I knew that I needed a little business capital and fast. In an effort to raise money, I worked with various lenders to discuss loans, financing, and special terms. Unfortunately, I quickly discovered that not every loan was created equally. Some loans had almost predatory terms like high interest rates and penalties, while others were completely fair. Fortunately, a business consultant of mine taught me about loans and financing, so that I could make better choices in the future. The information on this blog saved my business, and I know that it can help yours too.