Refinance or not to refinance, that is the question? Before considering refinancing your mortgage, there are a number of things you need to take into consideration. People generally refinance for a number of beneficial reasons, but there are also the flip sides to refinancing if you don’t properly execute it. Thus, before proceeding to go forward with refinancing your mortgage, you should weigh the pros and cons of your situation. Be sure to shop around for qualified brokers, lenders, and other servicers with reasonable costs.
Reasons for Refinancing Your Mortgage
- Lower your monthly payment with lower interest rate
- Change your loan type
- Shorten or increase the terms of your loan, depending on your financial goals
- Changing from an ARMs to a fixed-rate mortgage
- Getting an ARM with better terms
- Eliminate mortgage insurance
- Cash-out to use the money for repairs or home improvements
- Consolidating debts with lower interest rates
Factors You Should Consider Before Refinancing
- Currently Equity in the Property
- Other Outstanding Debt
- Length of Time in the Property
- Your Debt-to-Income Ratio
- Your Current Credit Score
- Costs of refinancing that include but are not limited to appraisal fees, mortgage discount points, prepaid taxes, insurance payments, loan origination fee, escrow fees, and other fees associated with the loan.
- Costs may outweigh the savings so do your math
- Mortgage Prepayment Penalties
- Plan to move and sell your home in the next few years
- Ask yourself, what will a refinance accomplish for you
So again, should you refinance your mortgage? This will depend on what is your ultimate financial goals and circumstances. You have to look at your situation and determine how cost-effective it is to refinance your mortgage. Preparation is crucial for a mortgage refinance. Figure out if it makes financial sense to refinance given your situation, research and learn the facts, and shop around before making the final decision.