How To Refinance A Home
Written By: Shawna Rice.
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Refinancing your home can offer you a lower mortgage payment, freeing up some of your monthly cash so that you can increase the quality of your family's life. Refinancing also allows you to pull money from your equity line in your home to use towards other debts or expenses. Best of all, you still can deduct mortgage interest from your taxes!
- Research current interest rates:
You can find current interest rates in most major Sunday newspapers (in the real estate section) or contact a mortgage broker. You can also call a loan officer or lending institution to find the current rates as well. - Decide on a mortgage type:
You cannot even begin to refinance your home unless you know what type of mortgage you want. The most common are fixed, adjustable or you can a mortgage that uses both. - Decide if refinancing is going to help you:
Compare the new interest rates against your current mortgage. If the average interest rates you researched earlier are lower (even by a few points) you should refinance your mortgage. - Run some numbers:
Take the amount you owe from your mortgage to calculate what the new monthly payment would be. You can find financial calculators & mortgage calculators online on many different web sites. You need to have the new loan amount available (current loan amount plus closing costs, such as points, title and escrow fees). Although you don’t have to include these if you are going to pay these fees up front. Be sure to include the new interest rate, as well as the number of months of the new loan. - More math:
Simply subtract your existing monthly payment to your mortgage from the new monthly mortgage payment. The number you see is the savings you will have. Then, divide the monthly savings into the total cost of the loan (including points, title and escrow fees). This is the number of months it will take to recoup your investment. - Make a choice - Refinance or keep your current mortgage:
Decide on whether you plan on living in your home longer than it will take to recoup your investment. If you will live longer in your home, then refinancing is probably a great idea.
Note: Be sure to ask yourself why you are considering refinancing. Do you want to lower your mortgage interest rate, or do you want to pay off other loans and credit cards that have higher interest rates with the equity in your home? If you plan to pay off bills, you must add up all the monthly payments of your credit cards, loans and mortgage that you want paid off and compare that to the new monthly mortgage payment.
Once you have decided whether or not to refinance your home you need to find a bank or agency that will offer you a refinance loan. For your convenience you can use the refinance rate comparison checker below.
