When considering saving money on your mortgage, you must consider the home refinancing pros and cons. Unfortunately, what is a pro for one could be a con for another. This is why you must not just jump on the bandwagon but carefully consider your financial position when thinking about refinancing.
The idea behind refinancing is to get better terms on your loan. A basic definition of refinancing is to get a new loan to pay off another. That's the simple part. All the stuff that goes along with the new loan is what determines whether it is worth it for you to refinance. I will discuss some home refinancing pros and cons and you have to determine whether they are pros or cons for your circumstances.
Lower interest rate.
For most people this is a pro. A lower interest rate means lower monthly payments. A good rule of thumb is to start thinking about refinancing when interest rates are 1 to 2% lower than what you currently have. But the advertised interest rate may not be what you qualify for. Income, payment history, debt load and credit score all combine along with other factors to determine your interest rate.
For most people this is a pro. A lower interest rate means lower monthly payments. A good rule of thumb is to start thinking about refinancing when interest rates are 1 to 2% lower than what you currently have. But the advertised interest rate may not be what you qualify for. Income, payment history, debt load and credit score all combine along with other factors to determine your interest rate.
This can also be a con because a lower interest rate means you are paying less interest throughout the year. This means that you will have less interest to deduct on your taxes. This may reduce your tax refund or cause you to pay more taxes at tax time.
Stretch out term.
This home refinancing pro can also be a con. If you've been in your house for some time and have paid down your loan, your principal could be quite low. When you take that lower amount and stretch it back out over 20 or 30 years, you can reduce your monthly payments quite a bit. But for older people or those who want to stop having home mortgage payments, this defeats the purpose.
This home refinancing pro can also be a con. If you've been in your house for some time and have paid down your loan, your principal could be quite low. When you take that lower amount and stretch it back out over 20 or 30 years, you can reduce your monthly payments quite a bit. But for older people or those who want to stop having home mortgage payments, this defeats the purpose.
There are many other home refinancing pros and cons that can determine whether it's a good idea for you to refinance.
Get In The Know now about refinancing, buying and selling homes, different mortgage types and other real estate information at Real Estate - Get In The Know
Get In The Know now about refinancing, buying and selling homes, different mortgage types and other real estate information at Real Estate - Get In The Know
Article Source: http://EzineArticles.com/expert/Reese_Evans/281741
No comments:
Post a Comment