There are many things to consider before refinancing your mortgage. Most importantly, you should weigh the pros and cons of your particular situation and act according to your own best interest. With some thorough research and planning, refinancing your Property Loan could turn out to be the best thing for your family and for your pocketbook.
3. A few weeks ago, I wrote about how I refinanced my
mortgage for the second time in a year. The second
refinance wasn’t actually part of my master plan, but
I ended up having to refinance in order to remove my
private mortgage insurance. And although
refinancing our home again proved to be a huge
pain, we are now saving 135 per month by no longer
paying private mortgage insurance premiums.
Thankfully, we managed to secure a no-cost
refinance that only cost us in time and effort. It’s a
huge relief that the process is finally over, and I am
fairly hopeful that this is the last time we
will ever have to refinance.
4. Refinancing has its perks
Luckily, I am no stranger to the benefits of
refinancing. Not only did we refinance our primary
residence, but we also refinanced our two rental
homes within the past 18 months. We did so in
order to take advantage of record low interest
rates and to shorten the terms of their loans.
Now that we have refinanced our rental
properties, they will be paid off much faster. In
fact, our two rental properties are due to be paid
off in about 13 years. Once they are completely
paid off, we will then have another (somewhat)
passive income stream and will be that much
closer to our lifetime dream of early retirement.
5. Since I have refinanced properties so many times, I
decided to write about some of the reasons that
people choose to refinance. Like me, you may find
that refinancing could save tens of thousands of
dollars in interest and years of mortgage debt
repayment. Unfortunately, it does take some effort to
get the process started. However, the time and effort
spent could easily be worth it depending on your
situation. Here are some reasons that you may want
to consider refinancing your home loan.
6. 5 reasons you may want to
refinance
Refinance to shorten the term of your loan. If you
have a 30-year mortgage, now may be a great time to
consider refinancing. With record low interest rates,
you may find that a 15-year mortgage is not much
more expensive than the 30-year loan payment you
have been paying.
Start by entering your information into a mortgage
calculator to see what your new payment might be. If
your new estimated payment is feasible, consider
contacting a mortgage professional. (When we first
refinanced our home from a 30-year mortgage at 5
percent to a 15-year mortgage at 3.25 percent, our
payment only increased by about 200. Since the
increase fit easily into our budget, the decision was a
7. Refinance to lower your interest rate. As I mentioned before,
interest rates are near a record low. And as I write this, 30-year
mortgage rates are hovering above 3 percent and 15-year loans
can be secured for an even lower rate. If your home is now
financed at a higher interest rate, it may be a great time for you to
consider refinancing. You could literally save tens of thousands of
dollars just by taking the time to fill out the necessary paperwork
and gather the needed documents.
Refinance to lower your payment. Refinancing your mortgage
at a lower interest rate could mean drastically reducing your
payment and saving tens of thousands of dollars in interest.
Lowering your mortgage payment could also free up hundreds of
dollars per month that could be saved or invested. Although
refinancing to lower your payment could increase the term of your
loan, it could make sense in your particular situation.
8. Refinance from an adjustable-rate mortgage to a fixed-rate
loan. If you currently have an adjustable-rate mortgage, now may
be the perfect time to refinance into a fixed-rate loan. Interest
rates are low now, but they may not stay this low forever. Locking
into a low, fixed rate can protect you from rising interest rates in
coming years. Additionally, a fixed payment is easier to plan for
and budget.
Refinance to cash out home equity. It’s a tempting proposition
to cash out your home equity by refinancing your home. It could
even be a great financial move in some circumstances. For
instance, it may make sense to cash out some of your home
equity in order to buy an investment property or start a business.
It mostly depends on what you are trying to achieve and if you are
someone who can manage your debts responsibly.
9. Can refinancing help you meet
your goals?
Before refinancing, consider what your goals really
are. Do you want to lower your monthly mortgage
payment? Do you want to pay off your mortgage
and get out of debt faster? Only you can answer
these questions.
It is also important to take all closing costs and fees
into consideration. Depending on which new loan you
choose, you may have to pay thousands of dollars in
fees for your new mortgage. It may take several years
to recoup the costs of refinancing, and it is important
to identify your breakeven point. If you plan on moving
in the near future, it may not make sense to refinance
your home loan at all.
10. Do you even qualify for a
refinance?
Due to government-backed programs, you may
be able to refinance your home even if you owe
more than your home is worth. The Home
Affordable Refinance Program, known as HARP,
loosens requirements for traditional refinancing.
According to Making Home Affordable.gov, your
loan must meet several requirements in order to
qualify:
11. The mortgage must be owned or guaranteed by
Freddie Mac or Fannie Mae.
The mortgage must have been sold to Fannie Mae or
Freddie Mac on or before May 31, 2009.
The mortgage cannot have been refinanced under
HARP previously unless it is a Fannie Mae loan that
was refinanced under HARP from March-May, 2009.
12. The current loan-to-value (LTV) ratio must be greater than
80%.
The borrower must be current on the mortgage at the time
of the refinance, with a good payment history in the past
12 months.
You can check if your mortgage is owned by Freddie Mac,
and you can check if your mortgage is owned by Fannie
Mae.
13. Consider refinancing decisions
carefully
Consider refinancing decisions carefully
There are many things to consider before refinancing
your mortgage. Most importantly, you should weigh
the pros and cons of your particular situation and act
according to your own best interest. With some
thorough research and planning, refinancing your
Property Loan could turn out to be the best thing for
your family and for your pocketbook.
14. To know more visit: http://www.idbi.com/loan-against-
property.asp
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