Is It Time to Re-Finance?
There are times when it makes sense to refinance your mortgage. It’s important to have a clear financial objective in mind so that you’re more able to choose the most appropriate loan. Ultimately, the decision is up to you to decide when it’s best for you to refinance, based on your individual financial situation.
Whether or not to re-finance is a question householder may ask themselves many times while they’re living in their house. Re-financing is essentially taking out one house loan to refund an existing house loan. This may sound odd at first but it’s important to realize when this is done properly it may result in a significant price savings for the householder over the course of the loan. When there’s the potential for an overall savings it might be time to consider re-financing. There are certain situations which make re-financing worthwhile. These situations may include when the credit scores of the householders improve, when the financial situation of the householders improves and when national rates of interest drop. This article will examine each of these scenarios and discuss why they may warrant a re-finance.
When Credit Scores Improve
There are presently so many house loan alternatives available, that even those with poor credit are likely to find a loaner who may assist them in realizing their dream of buying a house. However, those with poor credit are likely to be proposed unfavorable loan terms such as high rates of interest or variable rates of interest rather than fixed rates. This is as the loaner considers these householders to be higher risk than others because of their poor credit.
Fortunately for those with poor credit, many credit mistakes may be repaired over time. A few financial blemishes such as failures simply disappear after a number of years while other blemishes such as frequent late payments may be minimized by maintaining a more favorable record of refunding debts and demonstrating a power to refund existing debts.
When a householders credit score improves considerable, the householder should investigate about the possibility of re-financing their current mortgage. All citizens are entitled to a free annual credit report from each of the three major credit reporting bureaus. Householders should take advantage of these three reports to check their credit each year and determine whether or not their credit has increased significantly. When they notice a significant increase, they should consider contacting loaners to determine the rates and terms they perhaps willing to offer.
When Financial Situations Change
A change in the householders financial situation may also warrant investigation into the process of re-financing. A householder may get himself making considerably more money due to a change in jobs or substantially less money due to a lay off or a change in careers. In either case the householder should inquire the possibility of re-financing. The householder may get an increase in pay may allow them to obtain a lower rate of interest.
Alternately a householder who loses their job or takes a salary cut as a result of a change in careers may hope to refinance and consolidate their debt. This may result in the householder paying more as some debts are drawn out over a longer time period but it may result in a lower every month payment for the householder which perhaps advantageous at this juncture of his life.
When rates of interest Drop
Rates of interest dropping is the one signal that sends many householders rushing to their loaners to discuss the possibility of re-financing their home. Lower rates of interest are surely appealing as they may result in an overall savings over the course of the loan but householders should also realize that every time the rates of interest drop, a re-finance of the house isn’t warranted. The caution to re-financing to take advantage of lower rates of interest is that the householder should carefully evaluate the situation to ascertain the closing prices associated with re-financing don’t exceed the overall savings profit gained from getting a lower rate of interest. This is significant because if the price of re-financing is higher than the savings in interest, the householder doesn’t benefit from re-financing and may actually lose money in the process.
The mathematics associated with determining whether or not there’s an actual savings isn’t overly complicated but there’s the possibility that the householder will make mistakes in these types of computations. Fortunately there are a number of calculators available on the Internet which may aid householders to determine whether or not re-financing is worthwhile.