February 7th, 2019 8:22 AM by Jackie A. Graves, President
FREEHomeRefinanceAnalysis FREEFHAStreamlineRefinanceAnalysis FREEVAStreamlineRefinanceAnalysis
Interest rates have been creeping higher, but
they're still pretty low when you look at their
history. Meanwhile, housing prices -- which were crashing 10 years ago -- have
been on a steady climb.
Refinancing could be an excellent way to lower your mortgage
rate and cut your monthly payment, or tap into your home's rising value. But
always the right choice.
Ask yourself these questions before you go the refi route.Ask
yourself these questions before you go the refi route.
Your current mortgage loan may carry a penalty if you pay it off
early, maybe during the first few years.
These prepayment penalties aren't common, though you might find
them with interest-only mortgages and other unconventional loans. The cost
could make you decide quickly against a refinance.
Also, some local government grant programs, such as for
fixer-uppers or first-time homebuyers, carry special terms that can make
You might have to jump through lots of legal hoops. The goal is
to prevent house flippers from using the grants to buy properties that they
intend to resell quickly.
Read your loan documents carefully to find out if you have a
prepayment penalty or other refi restrictions.
When you refinance to take advantage of a lower interest rate,
you could cut your monthly payment — but wind up spending way more over the
If you have a 30-year mortgage and have made payments for 15
years, refinancing into a new 30-year mortgage would saddle you with tens,
maybe hundreds of thousands of dollars in additional interest charges if you
stick with the new loan for its entire term.
Closing costs are another consideration to balance against a
If you save $100 a month in interest but the refinance costs you
$5,000 at the closing table, it will take over four years to recoup that
expense with the money you've saved.
Also, be cautious of refinancing to use some of your increased
home equity to pay off debt. If have as much trouble with the cash-out refi as
you did with the other debt, you could wind up losing your house.
A mortgage refinance can provide savings and financial
flexibility to homeowners. Proceed with caution, be informed of the new loan's
terms, and take a close look at your existing loan so you understand the true
cost of a refi.
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