What You Need To Know Before Refinancing Your Mortgage

What you​ Need to​ Know Before Refinancing Your Mortgage
Today it​ is​ becoming more and more popular to​ refinance your original mortgage .​
But,​ is​ this right for you? How do you​ know whether you’re taking advantage of​ a​ great deal or​ letting yourself in​ for financial problems? Read on​ for tips to​ help you​ make an​ educated decision .​
First,​ understand that refinancing your mortgage means you​ take out a​ new loan on​ the​ amount of​ money you​ owe on​ the​ existing mortgage based on​ new terms and pay off the​ old loan with the​ proceeds from the​ new loan .​
Depending on​ the​ terms you​ obtain for your refinanced mortgage you​ may be able to​ obtain a​ lower interest rate than your original loan .​
This can be advantageous in​ a​ number of​ ways .​
First,​ it​ means you​ may be able to​ lower your monthly mortgage payments,​ which can be handy if​ you​ need to​ lower your monthly debt obligations .​
If you​ wish to​ keep your monthly mortgage payments the​ same,​ you​ could also pay off your home sooner with a​ lower interest rate .​
Over the​ course of​ your loan this could translate to​ major savings .​
In addition,​ with a​ lower interest rate you​ may also be eligible to​ receive cash back .​
This money can be used to​ make repairs on​ your home or​ consolidate higher interest credit cards .​
Before you​ refinance your mortgage you​ should understand there will typically be closings costs involved in​ the​ process .​
Depending on​ the​ lender you​ go with you​ may be either required to​ pay for the​ costs up front or​ include them in​ your loan and pay them off in​ your new payments .​
Costs that may be included in​ these fees are an​ application fee,​ cost of​ a​ new survey and title search in​ addition to​ fees for an​ inspection and appraisal .​
In addition,​ if​ you​ have less than 20% equity in​ your home you​ may also be required to​ pay private mortgage insurance just as​ you​ would if​ this was your first mortgage .​
Given these costs,​ at​ least in​ the​ beginning,​ you​ may actually end up paying more for your refinanced loan than you​ paid for your old mortgage .​
This is​ why it​ is​ important to​ do a​ comparison between the​ two loans and make sure you​ will really be coming out ahead with a​ refinanced loan .​
When you​ do the​ comparison make sure you​ figure in​ how long you​ think you’ll remain in​ the​ home because this can have a​ tremendous impact on​ your overall savings .​
This is​ important to​ help you​ determine where you​ will break even and begin to​ actually save money on​ your mortgage with the​ new refinanced mortgage loan .​
If you​ do not think you​ are going to​ be in​ your home for the​ length of​ time it​ will take to​ break even,​ it​ may not be worth it​ to​ refinance your mortgage .​
Finally,​ don’t forget to​ check the​ terms of​ your first mortgage and make sure you​ won’t be penalized for paying off your loan early .​
In some cases,​ this can amount to​ as​ much as​ $1,​500; which can seriously impact your break even point.

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