Reasons to love refinancing
When you originally take out a mortgage, you usually expect to make a calculated monthly payment for 30 years.
But often after about five years, you get an itch and are not satisfied with your current monthly payment and you certainly do not want to keep paying it for 25 more years.
So what are your options? Refinancing allows you to change your current mortgage to customize a plan to fit your lifestyle.
John Woodson’s article, “The Benefits of a Mortgage Refinance,” located on ezinearticles.com, explains why so many people are opting to refinance their current mortgage.
The best thing about refinancing is that it is not as stressful as taking out your first mortgage. When you applied for your first mortgage, you probably had to find a lender, find a loan program, hope you were accepted and, oh yeah, find a home to pay a mortgage on.
Now you have the home, you have the mortgage and you can take your time finding the terms and rates that are comfortable, without being rushed because you are already set with a working mortgage.
Since you are already a homeowner, you are probably already aware of the advantages that come with a mortgage, the most popular, being the tax benefits. What, then, are the benefits associated with refinancing a mortgage?
“First of all, if you have an adjustable mortgage rate, your current interest rate could go up as much as 3% when it expires, increasing your monthly payment hundreds of dollars. And that’s just to start! You can expect another increase in another few months. But if you refinance your current mortgage to a low, fixed rate, your principle and interest payment will never go up. A straight refinance of this type, whether you’re going from an adjustable or fixed rate to a lower fixed rate, with no cash out (except for the closing costs), will grant the lowest APR.”
A popular belief among many borrowers is that if you’re going to refinance your mortgage, you might as well completely clean your credit by paying off credit card debts, car payments and home equity loans.
Again, you will receive the great tax advantage of deductible mortgage for interest paid, while interest rates for refinancing are already lower than other credit financing rates. This could result in saving hundreds of dollars each month, which can be used for just about anything you desire.
You may also want to refinance to make home improvement, either for value (remodeling the bathroom) or for pleasure (adding a pool). But purchasing state-of-the-art heating and cooling equipment through the saving accumulated by refinancing may also save money on your monthly utility bills.
“Finally, my personal favorite is the skipping a month of payment! The reason for this is because you actually pay for the month that just passed. For example, say that you refinanced your mortgage on July 31. There is no payment due in August! Your first payment would be due September 1, as you would pay for the previous month. But, if you refinanced your mortgage on the 15th of July, you will prepay interest at closing to cover you until the end of the month. Your first payment still wouldn’t be due until September 1.”
Every time is a good time to refinance, regardless of current interest rates because, unless you own a crystal ball that actually works, you cannot accurately predict future interest rates.
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