Refinancing your Mortgage – 4 Questions you Should Ask First

Make no mistake about it, refinancing your home is one of the biggest financial decisions a family can make. It can literally save you thousands of dollars if done right. A lot of thought and research should go into any decision like this and this article will help you in deciding if refinancing is right for you, and what you should consider first. When you consider whether to refinance your home, there are really 4 main areas to look into.

1. How long will your repayment period be?

2. How much of a drop in interest rates will there be?

3. Are you planning on living in your home for the next several years?

4. Can you find a bank or lender to refinance your home right now?

Let’s look a little closer at each of these areas.

The repayment period is important because it will take a number of years before you can recover the costs of the refinancing. You’ll have lending fees, closing costs, points, legal fees, appraisals, etc. Every state is different and you should take the time to find out what will be included in your particular closing costs. Keep in mind though, if you have to you can add in the closing costs to your loan amount.

As far as lowering your interest rate, you should at least cut your rate by 2{ef6a2958fe8e96bc49a2b3c1c7204a1bbdb5dac70ce68e07dc54113a68252ca4} or more to even consider refinancing your home. This is due to the costs involved. If you are only reducing your rate by 1{ef6a2958fe8e96bc49a2b3c1c7204a1bbdb5dac70ce68e07dc54113a68252ca4} or so, then you are basically just spinning your wheels so to speak.

With point number 3 you really need to consider how long you plan on living in your present home. If you will be moving out in 2-3 years, then refinancing most likely will not be a good financial decision. Again, due to the costs involved you just can’t make it work out in your favor.

Finally, you will need to find out whether you can get a loan right now. As this article is written, banks and lenders have really tightened up their lending practices, making it difficult for many people to get a loan right now. Instead of the normal 90{ef6a2958fe8e96bc49a2b3c1c7204a1bbdb5dac70ce68e07dc54113a68252ca4} LTV ratio (loan to value), you may need it down to 75-80{ef6a2958fe8e96bc49a2b3c1c7204a1bbdb5dac70ce68e07dc54113a68252ca4}. Of course, every lender is different and you may have to speak to several before finding the answers you want.

The key is taking your time and ask a lot of questions. Get all your facts and then you will be able to make a sound decision on refinancing your home.