Is Mortgage Refinancing the Right Long Term Financial Strategy for You
View PDF | Print View
by: marciafreeman
Total views: 89
Word Count: 456
If you are looking to lower your monthly expenses, mortgage refinancing could give you just the right amount of financial breathing room you need. Homeowners refinance for a variety of reasons: to lock in a lower fixed rate on an adjustable loan just prior to an interest rate reset, to tap into home equity to finance home improvements or a consumer loan payoff (a good income tax strategy) or to consolidate two mortgages into a single loan.
Mortgage refinancing makes excellent financial sense if you intend to remain in your home for a long time. You will essentially be wasting your money if you intend to sell your home fairly soon, as if takes close to two years to recover the associated closing costs. Your true savings begin when the aggregate amount of your monthly savings equals the amount of your closing costs.
Your mortgage refinancing transaction progresses in the same order as the loan you took out when you first bought your home. You will also be responsible for the same type of closing costs: loan application fees, an update and review of the title to your home, the title insurance premium, home appraisal and document preparation fees, attorney fees, and the mortgage tax, recording and filing fees imposed by your county clerk, not to mention attorneys fees. Your lender will hire its own attorney for the transaction even if you do not, and it will pass the fees on to you. All these costs can either be paid up front or added onto the amount of your mortgage. Either way, you will not start realizing true savings on your monthly expenses until you have paid yourself back the aggregate amount of these costs.
Consider, too, whether you want mortgage refinancing to work to lower your monthly payment by reducing interest or to raise your monthly payment to pay principal down quicker. The first strategy has an immediate impact on your monthly expenses but will end up costing you more in interest over the long term; the second will pay your loan off sooner and cost less interest overall. It all depends on your long term financial strategy.
Taking a lesson from the housing crisis of the late 2000s, it would be to your great advantage to read the small print before signing on the dotted line. Too many people were seduced by the prospect of owning more home than they could afford (and preyed upon by unscrupulous lenders), and suffered dire consequences as a result. Do not allow yourself to fall prey to the same tactics. Topics of interest Home equity loans Mortgage rates Refinance rates
About the Author
Similar sites about refinance, visit www.getsmart.com/refinance.
Rating: Not yet rated