Mortgage RefinancingYour home is your most valuable asset. You do not want to risk losing it due to your inability to meet your monthly payment. If your payment is higher than you can afford or if the interest rate you are currently paying is higher than what the market is offering, you should consider mortgage refinancing. Mortgage refinancing has also become a popular way to lower your overall debt load. If you can borrow additional funds that will allow you to pay down credit card or other debt, you may be able to decrease your overall monthly payments. Mortgage refinancing is definitely worth a second look to anyone who is developing an overall plan to reduce their debt.
- Reduce your monthly house payments
- Improve the terms of your home loan
- Lower the interest rates you are paying
- Pay down high interest credit card debt
- Work toward becoming debt free
What is Mortgage refinancing?
Mortgage refinancing is the process of assuming a new loan to pay off your current home loan.
Should I Refinance My Mortgage?
To determine whether or not mortgage refinancing is right for you, all you need to do is a little homework. Gather your monthly payment, the life of your loan, and the interest payment you are currently paying and you should be able to calculate how much you will save each month through a mortgage refinance. Of course, you need to take other factors in account as well, such as what the bank fees will be to secure the new loan. Never the less, it is relatively easy to determine how much you will save.
You also need to consider the type of loan you currently have and what type of loans are available. Will you be able to swap your current adjustable rate mortgage (the interest rate you pay is tied to the current prevailing interest rate) for a fixed rate loan with a low interest rate (the interest rate on a fixed rate loan stays the same over the life of the loan). There are other types of loans available as well. Do your research and you will be able to match your financial situation with the best loan for the long term.
How much can I save each month?
Everyone’s financial situation will be a little different. We can look at an example of a typical mortgage refinancing though. This example assumes you will be trading a fixed rate loan for another fixed rate loan.
| | Original Loan | Refinance | | Mortgage Balance: | 100,000 | 100,000 | | Remaining Payments: | 180 (15 years) | 180(15 years) | | Interest Rate: | 9.75% | 5.75% | | Monthly Repayment | $1,059 | $830 |
In this mortgage refinancing example the monthly savings is $259! Imagine what you could save over the life of the loan.
Is there risk in Mortgage refinancing?
Every financial transaction contains some element of risk. If you are considering a mortgage refinance in order to lower the monthly payment on your home loan, then there is probably very little risk. If you are considering the refinance so that you can assume more consumer debt, then it is very risky. You need to carefully evaluate your own personal situation and your objectives before entering into any financial agreements.
Is Mortgage refinancing my only solution?
There is never only one solution to improving your financial situation. Mortgage refinancing is a great tool to lower your monthly home payment or readjust the type of loan you are carrying. In managing your overall debt load you have many tools available to you, mortgage financing is just one.
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Mortgage Refinancing
