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Refinance - If You Must
By Daphne | May 2, 2008
Just because the rates are very enticing, doesn’t mean that you should refinance right now.
Before you decide to refinance, make sure that you would really benefit from refinancing.
If someone calls you offering you information on refinancing and you haven’t made any inquiries online or via your bank, then do not give out any information and decline any offers made through cold calls.
Do not refinance for the same term that you originally had your loan. If you have an adjustable or fixed rate loan and see an attractive rate for a 30-year mortgage - do the math first. If your original term is 30 years and you have already paid your mortgage for four years; refinancing your mortgage just for a lower interest rate may end up costing you more. This is especially true if you will have another 30-year term. It may be possible that although your payment will be lower each month, you will not save money in the long run because you are paying for a few extra years. See if the rates are just as good for a 25- or 20-year mortgage.
If you can refinance to a loan that is 1 percent lower or greater for a shorter term you may pay more each month but you will also build equity and save thousands of dollars. Refinancing for a half point for the same term could actually cost you money because you have to pay closing costs and other fees. If your rate is truly high and you cannot afford to pay extra so that your equity increases, contact your lender and see if your lender can offer you a better rate. Since this is the same lender, you may have fewer fees associated with this transaction. Make sure you know your terms!
For people who are unsure whether or not they will live in their house for several years or not, putting your money into your home is not a bad idea IF your area’s home prices are not steadily decreasing, you do not have a great deal of debt and you are saving for long term goals such as retirement or kid’s college fund.
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Topics: May 2008 |