Have the great new rates got you thinking about getting a mortgage refinance loan? If so, you’re certainly not alone, but there are some points to keep in mind along the way.
If you don’t currently have a fixed rate mortgage then you’ll definitely want to get one as those interest rates can become a killer. However, you may still want to consider a mortgage refinance loan even if you currently have a fixed rate loan. Sometimes, a refinance mortgage can be so much lower than current monthly payments!
Also, keep in mind that the lowest interest isn’t always the best deal on a mortgage refinance. The “catch” is that some companies will give you a very low interest rate but will charge several points up front.
For example, if you were borrowing $300,000 and was being charged three points, you’d be paying $9,000 to borrow the money in addition to other fees and closing costs.
Mortgage Refinance – Time To Lock In At A New Rate?
Mortgage refinancing is a fairly simple process. All you are basically doing is taking out a new mortgage on your house. You would then use the money from your new mortgage to pay off the existing one.
There are basically three reasons to take a mortgage refinance:
1. The first of these is to reduce the amount of interest that you have to pay.
A mortgage is a long-term loan, so the interest can amount to a lot of money. If you can get a lower interest rate, you will save a considerable amount of money over the length of the mortgage. The most common reason that you would get a lower interest rate is that your credit has improved since you initially took the mortgage.
There is another way that you can save money on interest by refinancing and that is by reducing the length of the mortgage. If you are now earning more than you were when you first took the mortgage, you can probably afford to pay more each month. Doing this would allow you to trade in your thirty-year mortgage for a fifteen-year mortgage. Doing this would more than cut the interest that you have to pay in half resulting in savings that may well be hundreds of thousands of dollars.
2. The second reason for a mortgage refinance is to reduce the amount that they have to pay each month.
If you can get a lower interest rate this will reduce the amount that you have to pay by a small amount. If you need to reduce it even further you are going to have to extend the length of the mortgage. This will significantly increase the total amount of interest that you have to pay but it will also leave you with smaller monthly payments.
3. Turn the equity that you have in your house into cash.
This is probably the most common reason that people refinance. In some cases, it makes sense if you are using the money to pay off your credit cards. However, it’s rarely a good idea to turn your equity into cash unless you will be using that money for something that will increase your net worth.
Looking for a help with your mortgage refinance, on Financial Samurai News you’ll find a wealth of information that will help you make the right choice.