Things to consider before refinancing:
1) The Interest Rate You Are Paying
Consider the interest rate you are now paying before refinancing. Compare it
against the current interest rate to see how much you would save by mortgage
refinancing. Use our free mortgage calculator to determine your new monthly
payments. (Use our Mortgage Calculator)
2) The Current Interest Rate
Check the current interest rate. To get the benefits of a lower rate, you may
have to pay fees associated with the loan, unless your lender is doing a no fee
loan. Before committing to a refinance, be sure you have discussed the fee
options with your loan officer. [Get the Current Mortgage Refinancing Rates]
3) How Long You Will Live In Your Home
The median length of stay in a home is 8.2 years. However, you may have a
better idea of how long you will be in your home. If you do not plan on owning
your home for much longer, the lower payments associated with the refinancing
may not cover the mortgage refinancing fees. If you plan on staying in your
home for along period of time, refinancing could be an excellent way to reduce
your monthly payments. Also, if you are planning on moving into a new home
while retaining the old home as a rental property, refinancing is a solid plan.
You can lower your monthly mortgage payment and in turn, increase your rental
income.
4) Consolidation
If you have several outstanding bills, you may want to consider refinancing
your home and in turn, consolidating and paying off your other debts. If you
have equity in your home, you may be able to access that equity through a
"cash out" refinance. You could choose to apply that equity to a debt
consolidation plan, a new car, or home improvements.