The decision to refinance your mortgage can depend on a variety of reasons. This is a choice that should that should involve plenty of thought as there may be much more at steak than one may think. Closely consider these tips before making the decision to refinance your mortgage.
What is your overall goal?
Determining your own personal goal will be one of your first steps in the refinancing process. Reducing the interest expensive is the most common goal of refinancing, while some homeowners value the ability to extend the loan back to 30 years to reduce the monthly payment. Many homeowners refinance with the goal of getting out of or into an adjustable-rate mortgage. This differs depending if you are in a high or low interest rate environment. If you plan to use the money to put back into your home on home improvement projects your situation is different than someone who plans on using that money to buy a new car, pay off credit card debt or put their children through school. The key to making the right decision is to sit down and figure out how exactly you will re-pay the loan.
What is at risk?
Before finalizing an agreement for refinancing it is important to make sure it covers the penalty and is worthwhile. A major risk of refinancing is the penalty it may incur as in most credit agreements the mortgage company may be allowed to charge you a fee that can be as big as one thousand dollars. The money you may be saving in the long run can potentially make the fees worthwhile, but it is crucial to make sure of this before any final decisions are made.
When to refinance
Taking into account how long you plan to be in your home is one of the most important things to do before refinancing. If you don’t plan on being in your house for the long run, you should most likely stay with your current mortgage. You want to consider the number of months it takes to recoup the closing costs of the new mortgage. While short term savings may sound ideal, the interest that you occur over a longer period of time may do more damage without realizing. Here is a Monthly Payment Calculator from Nothnagle home Securities that will help you get an idea for where you stand.
Types of refinancing
The two main types of refinances are cash-out refinancing and “plain vanilla” refinancing. Cash-out refinances often are used to pay down debt, but this type of mortgage has both pros and cons. By “cashing-out” you could take a new mortgage out on the same property; this usually has higher interest rates due to the higher amount of money being at risk for your lender. Plain vanilla refinancing is meant to replace your exiting mortgage with a new one at a lower rate an advantage can be the slightly lower interest rate while you aren’t significantly increasing your outstanding mortgage debt. Once again the type of refinancing you choose will depend on your own personal situation. Everyone is different therefor there are many options to choose from.
What to do to refinance
The first step to refinancing your home is to discuss with your mortgage company the options available to you. Also consider talking with other mortgage companies as their options may be more suitable for your needs. It can be beneficial to get a second or third opinion when dealing with refinancing as everyone has different options.
The refinancing process is fairly simple. Sitting down with an expert to discuss whether or not the decision is right for you is the first step to refinancing your mortgage. Nothnagle Realtors offers a variety of mortgage services in order to appeal to everyone’s needs. If you are considering refinancing your mortgage or would like to know where you stand with your current situation contact your mortgage company today or visit Nothnagle Realtors Mortgage Services to get paired with the right Mortgage Banker for you.