Refinancing Your Home

Refinancing Your Home

Refinancing your home can be an excellent way to lower your monthly mortgage payment, raise cash, or consolidate debts with high interest rates.  However, you need to do your homework before deciding to refinance. 

One important factor is the difference between current interest rates and the rate of your original loan.  You also need to take into account the amount of time it will take to recoup the costs of refinancing.

Keep in mind – refinancing usually lengthens the time it takes to pay off your mortgage.  If you are 3 years into a 30-year mortgage and then refinance with a new 30-year loan, you’ll end up making payments on the house for 33 years.  Nevertheless, if the monthly savings are substantial enough, you still could end up paying much less over the long haul with the new loan.

Be careful of lenders offering 100 or 125 percent home equity loans, as their rates are often markedly higher than traditional lenders.  In addition, any amount you borrow that is above the market value of the house is NOT tax deductible.  Check with your tax professional on this.

Talk with your lender about the different types of refinancing loans available today.  You should take some time to shop around and speak with several lenders before making a decision.  Be sure to discuss all the expenses and benefits, as well as what will be expected of you, in advance.  The more you educate yourself, the better your chances of finding the right refinancing package.

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