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 How To Know When To Refinance Submitted By: John Harris Refinancing can be a great money saving tool for homeowners, or it can be the wrong thing at the wrong time. Last year, according the Mortgage Bankers Association, Americans refinanced to the tune of $1.17 trillion dollars. The rising cost of fixed rate mortgages drove that to a mere $938 million this year. That’s still a huge number of people who choose to refinance their homes or commercial mortgages. Here are some guidelines to help you decide if this is the right time for you to refinance. What to Know Before You Refinance You need to be able to answer some basic questions about your home or real estate investment before you can make a wise decision about the best time to refinance. For instance, what is your current interest rate? Is it fixed or variable? Is your home’s value increasing? Can you afford the closing costs associated with refinancing? What are your plans for your home or real estate?This background knowledge will help in several ways. If you plan to move within the next three years, or if the difference in interest rates in less that 1.5%, then refinancing might not pay off right now. Remember, once you refinance you need time to recoup the closing costs you have invested. However, if you have a variable rate that is climbing, or a significantly higher fixed rate, refinancing may offer you some appealing options. Why People Refinance People refinance for different reasons. In many cases, the decision to refinance can help to reduce your monthly payments and interest, or reduce the life of your loan and the principle owed. Others obtain a cash-out closing to make home improvements or pay off consumer and credit card debt. This method usually doesn’t lower your payments. Before You Decide to Refinance But before you jump into a decision to refinance, be aware that there are costs involved. Closing costs and points will affect how much money you must pay up front to refinance. A point is equal to 1% of the total amount of your loan. You should expect to pay 2-3% in points when you refinance. Just like when you purchased your home or real estate investment, the more money you put down, the lower your interest rate is likely to be. There are instances where you can get a no-cost closeout, and these are ideal, Click here for the rest. |
 
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