Home Mortgage Loan Refinance - Refinancing A Fixed Rate Mortgage
Refinancing a fixed rate mortgage is usually only suggested when
interest rates fall, but you can also save money by changing
your loan terms. You can also pull out part of your equity to
pay bills or renovate.
Lower Interest Rates
In general when interest rates are at least 1% lower than your
current mortgage rate, it pays to refinance. But you need to
consider other factors, such as the length of your mortgage,
loan costs, and how long you plan to stay in your home.
An adjustable rate mortgage (ARM) should also be considered if
you plan to move soon. With rates lower than a fixed, you will
see lower monthly payments. But you have the risk that your
rates and payments will increase over time.
To help decide if refinancing makes sense for you, calculate the
difference in interest payments over the course of your loan.
Online mortgage calculators can help you find both total
interest costs and monthly payments.
Better Loan Terms
Besides lower interest rates, you can save money by converting
to a better loan term. A shorter loan, such as a 15 year term,
can save you thousands on interest payments, even if you don't
have a lower interest rate. However, your monthly payments will
be 10% to 15% higher.
You can also reduce your monthly payments by refinancing for a
longer term. You trade lower payments for higher interest costs.
Access Your Equity
Whether you want to pay off credit cards or pay for your child's
education, you can pull out your equity by refinancing. One of
the advantages of using your equity is that your interest is tax
deductible.
However, if you just want to tap into your equity, a better
option is a home equity loan. You can pull out your equity,
write off your interest on your taxes, and avoid loan fees.
Online Lenders
Online financing companies allow you to research terms and fees
from your home. You can receive quotes within minutes online, so
you can compare finance packages. You can also apply online and
qualify for discounts on closing cost with some lenders.