Interest rates are falling and many people are taking advantage of the situation. Everyone loves to save money on mortgage payments but it is not always easy to determine when it is the appropriate time to refinance. Here are some tips on determining whether refinancing is right for you at this time. With this help, you should be able to save money or get funding for certain expenses.
Step 1: If you have a fixed rate mortgage, compare the rate to the current mortgage rates. If the current rates are significantly lower, refinance . If you have an adjustable rate mortgage, your payments will increase with rising interest rates. Consider how high the rate may go and determine what that will equate to in terms of monthly payments. If rates are low, consider refinancing the adjustable rate mortgage to a fixed rate mortgage.
Step 2: Consider your individual situation. If you are paying on a loan that requires mortgage insurance but you have built up enough equity, you may be able to drop that insurance when refinancing. Even if the interest rate on the new loan is the same, you may save hundreds of dollars each month.
Step 3: If you have a three or five year adjustable rate mortgage, learn when your introductory term expires. This will give you a jump on refinancing your loan before the higher payment kicks in.
Step 4: The goal of refinancing is not always to lower the monthly payment. Homeowners can pay down high interest debt, pay college expenses, or do home remodeling by using the equity in the property. Refinancing provides you with the needed cash without having to take out a second mortgage. Homeowners should determine their goals, research the various options, and make the choice that is personally right for them and meets their financial timeframe.