When Is It The Right Time To Refinance?
Refinancing a mortgage loan can be quite an undertaking, as the process is very similar to purchasing a new home. For this reason and others, many homeowners are hesitant. However, there are times when a re-fi is the best financial move you can make, including the following two scenarios:
If you’re stuck in a loan with a high interest rate or undesirable terms – think an adjustable rate mortgage with unpredictable monthly payments, for instance – refinancing could save you thousands of dollars per year. Maybe your credit score has improved or maybe average market rates are down; either way, you can probably score a loan with superior terms. Be sure to tell your mortgage lender what your refinancing goals are, so they can best assist in finding you a new loan to suit your needs.
Some homeowners know it’s time to refinance when they need to free up cash to pay down an existing debt. This is called a cash-out refinance, and it allows homeowners to take out a new mortgage loan for more than they owe on the house. This can be a risky move, as it will typically increase your monthly mortgage payment. However, in cases of high-interest debt like a credit card or personal line of credit, you will likely save money in the long run by eliminating the high-interest debt more quickly.
Even if you’re not in an undesirable loan or in need of cash, the need to refinance may arise. Sometimes it’s a necessary step to settle a divorce, or to eliminate the need for private mortgage insurance. If you’re unsure whether a refinance is the best move for you, talk with several lenders to ask questions and learn your options.
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