Mortgage Refinancing: Is Refinancing Your Mortgage Beneficial for You?

Depending on your reasons for considering mortgage refinancing, it is possible to reduce your monthly payments or even withdraw equity from your home if you don't qualify for a lower interest rate. Some financial advisors tell only refinance if the rate you qualify is two points lower than your existing rate; however, mortgage refinancing makes good financial sense in a number of different scenarios. Here are several tips to help you decide if mortgage refinancing is right for you.

The general rule of thumb with financial advisors is that the new interest rate should be 2 percentage points lower than you are currently paying. The cost of mortgage refinancing has gone down significantly in recent years and the 2 point rule of thumb no longer makes sense for everyone. You could save money by qualifying for a loan as little as 0.5% point lower. There are of course other reasons for mortgage refinancing even if you cannot qualify for a lower interest rate.

Mortgage Refinancing to Lower Your Payments

There are a number of different loan packages that offer lower interest rates than traditional fixed interest rate loans. Choosing an interest only or option Adjustable Rate Mortgage, provided you know what you're getting into, could lower your monthly payment enough for you to take back control over your monthly budget. You can also choose mortgage refinancing with a longer term length. Extending the term with a forty or fifty year loan will significantly lower your payments.

Mortgage Refinancing with Cash Back

Another common reason for mortgage refinancing is to borrow against the equity you own in your home. Mortgage refinancing with cash back is an affordable alternative to costly home equity lines of credit and second mortgage loans. By refinancing your mortgage and taking cash back you have one lower payment instead of two mortgage payments to juggle each month. Because your home is secured by one loan instead to two, you will qualify for a lower interest rate with mortgage refinancing.
You can learn more about mortgage refinancing, including costly homeowner mistakes to avoid by registering for a free mortgage guidebook.

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Posted in: Beneficial,Mortgage,Refinancing