Authored by Rodney Southern in Mortgages
Published on 05-07-2009
There are a few times in your life when refinancing your home seems like a great idea. Some of those times are good times, and some of those times are not so good. Trying to figure out the right time to refinance your home is really the hardest part. How do you know if you are refinancing for the right reasons? How do you know the good from the bad? This article will give you the scenarios under which refinancing your home is a good idea.
If you have found that you are making more money than when you first financed your home, refinancing your home is probably a good idea. This is because your mortgage can be shortened with a higher monthly payment (which you can now afford) and your savings in interest will be significant. Another good reason to refinance your home is when you see that you can not afford your current monthly payment. You can lengthen the term of the loan, and get payments that you can afford.
Another common time to refinance your home is when you find yourself facing a large bill. College education, vehicles, or home repairs can be very expensive and borrowing against the equity you have in your home is much cheaper than credit cards, or personal loans. Bank loans are also more expensive as a rule. There are several options available in this area of refinancing so be sure you look into them all.
When the interest rates drop to a significant level of savings over what you originally set your mortgage at, it is a good time to refinance your home. This can save you in a number of important ways. You can get much lower payments in this way, or you can keep the same payments and pay off the mortgage sooner. Either way, you win by refinancing your home.
The common denominator within each of these situations is change. If you notice changes in your current financial situation, change in your life and situation, change in the interest rates, or change in the home market in general, you might choose to look into refinancing your home. If you can save money in the long or short run, it is a good idea to consider the refinancing.
Unfortunately, people often attempt to refinance for other reasons. If you are going to lose money in the long run, then you do not want to refinance your home. This includes trying to refinance when interest rates are up, when fees and penalties will negate any savings, and when you are going to put yourself into debt for things that you can not afford.