In the financial world, several percentage points, usually, spells major economic shifts. This is the fact that refinancing hinges on. You might mistakenly think that it is designed to change an old mortage; but it is in truth a new mortgage taken to pay the previous one.
If you compare your old mortgage with any refinancing program, you will see that interest rates in the latter are lower. In fact, they are down by around two percentage points from the company standard. When you translate this into monetary terms, you could end up saving a significant sum.
What is another loan for? Often, the reason why people get into refinancing offers is because it is less costly to pay off the newer loan (due to lower interest rates) and because the processing period with the latter is speedier. But while all these sound very simple to perform, you must also realize that you won't be able to exploit it without enough know-how about how it works.
Should I refinance my mortgage?
The concept of a new loan to replace an old one sounds inviting. But it should be noted that it's not as simple as 1-2-3. For example, you will still have to pay the fees necessary to transfer your mortgage to the new one. Just like your original mortgage, you will be facing all sorts of charges and costs at the onset.
Do you really get save more than you shell out? Use the free refinance calculator at http://www.refinanceright.com to find out.
One of the issue that haunt loans are the payment terms. Your old deal must have been difficult to follow that's why you opted for a new one; but don't think that things would change. It is, thus, advised that you only agree to refinance your mortgage if the interest rate is lower by at least two percentage points, to be safe.
This is a hard choice, for sure, but, currently, lenders have introduced no-cost refinancing deals that derive profit from either slightly higher interest rates or passing some of the cost to the amount lent. This is a new savings technique that deserves closer inspection. A no-cost refinancing plan that only has a slightly higher rate than the current but still significantly below your initial mortgage is still a good strategy.
There are three major things you will benefit from taking a refinancing program. One is speedy equity, which means you can pay off your loan early if you suddenly become ready with enough money. Another is, as said earlier, lower interest rates. Also, you are given the option between an adjustable mortgage rate and fixed rate mortgage.
As a conclusion, while mortgage refinancing allows for greater flexibility and offers more convenience, it is not something that you should just jump into without careful consideration. No matter how you look at it, it is still a loan, and you are still compelled to stick to your payment agreement. To find out if you can qualify for mortgage refinancing, feel free to check out the refinance calculator at our site.
