Free Investment Advice

Homeowners who consider refinancing do so in order to save money on interest payments.  If you intend to refinance, the rule of thumb is to ensure that the new interest rate is below two percentage points from what you are currently paying towards your mortgage.

There are other reasons why a homeowner would consider refinancing.  Let’s take a look at a few.

Let’s assume you have a 30-year mortgage and want to refinance it for less time.  If you have the funds available, you could refinance your home for 25 or 15 years if you so choose.  Conversely, if you have a short-term mortgage, you can lengthen it in order to utilize the money to pay off debt or pay for college loans.

Shorter-term mortgages allow you to build up equity in your home and pay off the mortgage sooner rather than later.  It really depends upon your financial situation, age, how close you are to retirement, and how long you intend to stay in your home.

Perhaps you have gained an excellent credit rating over the years.  This would be a good time to take advantage of the low interest rates for consumers who have excellent credit and FICO scores.

Another reason why you may wish to consider refinancing is to change from an ARM or Adjustable Rate Mortgage to a Fixed Mortgage.  If you decide to take this particular route, it is advised that you speak to a financial planner to ensure you can both afford it and save a substantial amount of money.

Finally, for those of you who have a balloon mortgage – refinancing may be the best way to avoid having to pay the higher payments that will necessarily follow.

It is estimated that the current recession may last through this year and beyond.  There are many questions you have to ask before you consider refinancing.  Is your job secure?  Can you afford the fees associated with refinancing?  Do you have excellent credit and is your FICO score at 750 or higher?

While refinancing can save you money in the long term, remember that missing a payment may cost you dearly.  Give it a great deal of thought and seek professional assistance if necessary.