August 2nd, 2011
Refinancing Your Home
Have you considered refinancing your home? Many homeowners take advantage of this service. Refinancing takes advantage of positive interest rates and updates your current mortgage loan with a new one.
The goal of refinancing is to pay off your current loan giving you the balance of the money to use as you wish. You could refinance to reduce your monthly payments, to pay off your mortgage at a quicker rate, to gain access to extra money, to consolidate two loans into one payment, to move from an adjustable rate mortgage to a fixed rate one.
When should you refinance your home? You can refinance when you have built up 10% equity in your property. If it is a Fannie Mae mortgage you should have 5% equity built up. The refinance interest should be lower that your present rate. The general rule of thumb is that it should be at least 2% lower than the rate you currently are paying. There are costs associated with refinancing and you need the low percentage rate to cover these costs. However there are low-cost and even no-cost refinancing if you look for it – but bear in mind they come with higher interest rates. The solution is the shop around until you find the refinance option that suits you best.
Do not apply for refinancing is you have had a late payment in the previous twelve months. Refinance companies usually do not favor this. They also do not like to see problems when they run a credit report. Therefore you should attempt to clean up your credit and pay off as much debt as possible before applying for refinancing. These things affect the interest rate you will be offered, or may in fact mean that you will not be approved.
There are certain circumstances where it may not be appropriate to refinance. If the value of your property has gone down it is not a good idea. Also if you are close to ending the term of your current loan you may lose equity if you refinance. You should probably not refinance if you have reduced the equity on your home via a second mortgage or home equity loan.
Therefore refinancing may be a good option for you if you carefully plan it out, weigh up the different options and shop around. Refinancing may be the ideal option for you, but always get the facts before you enter into a mortgage refinance loan agreement. A refinance calculator is a useful too when considering your options.
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