Ways & How

Why It Still Make Sense to Refinance in Todayís Market

Why It Still Make Sense to Refinance in Todayís Market Why It Still Make Sense to Refinance in Todayís Market

Not that long ago there existed a general rule that stated that you should√ā¬†only consider refinancing if you could effectively lower the interest rate√ā¬†of your mortgage by two percentage points at least. However, this rule no√ā¬†longer applies because now you can refinance without paying extra costs.

Good Reasons to Finance

This is one of the reasons why it still makes sense to refinance in today's√ā¬†market. When refinancing literally costs you nothing, any savings you√ā¬†make in the reinvestment will make the decision worthwhile. However, there are many other reasons why refinancing could be a good option, including the fact that it could both free up any tax-deductable cash and improve your cash flow by having your monthly mortgage rate lowered.

Further positive aspects of refinancing include the possibility that you√ā¬†could opt for a fixed-rate loan rather than the adjustable-rate mortgage√ā¬†that you may currently have or, of course, vice versa. In addition,√ā¬†refinancing could effectively eliminate any Mortgage Insurance you are√ā¬†paying at the moment.



style="text-align: justify;">Advantages of Switching to a Fixed-Rate Loan

If you currently have an adjustable rate on your mortgage you will probably have noticed that this has gone up in recent years. A better option may be to switch to a fixed-rate loan. The important point to remember, however, is that there now exists a variety of fixed-rate loans, all of which may have widely differing terms.

While in the past a loan would tend to be fixed over a period of 15 or 30 years, these days the loan terms tend to be much shorter. Indeed, http://www.myonlineestateagent.com/ for example, has indicated that there are loans available on today's market that offer terms of as little as three years.

Advantages of Switching to an Adjustable-Rate Mortgage

If, on the other hand, you already have a fixed-rate loan, then in certain situations it may be to your advantage to switch to an adjustable-rate mortgage. For example, if you are currently considering a move then opting for a low-rate adjustable mortgage could end up saving you a substantial amount of money in the long term.

Eliminating Mortgage Insurance

In cases where the buyer has put down a deposit of less than 20% on the purchase of their home, they will probably be paying mortgage insurance. However, once the home owner's equity in the property has exceeded the 20% mark - either because the value of the home has increased or they have paid off a substantial part of their loan - then this will be the time to refinance because the mortgage insurance can then be eliminated with the new loan.

Lowering the Monthly Repayments

However, the most common reason for refinancing is that it means your monthly repayments could be lowered. The first thing to do is to contact your mortgage provider in order to find out exactly what costs may be involved. This will include all the costs and not just the fee of the lender. Then clarify the loan amount that the new payment will be based on.

You can then ascertain the break-even point by taking the cost of the refinance and dividing it by your monthly savings.

Reduce the Loan Period

Another good reason to refinance is that it will give you the option of reducing the term of your loan. For example, if you currently have a loan that has been taken over a 30-year term, reducing this to 15 years could save you a considerable amount of money on interest payments.

While the monthly payments will, of course, be higher, in the long term you will end up paying much less. Furthermore, making the decision to do this when interest rates are low could be a very wise move. Even if you only plan to occupy the house for a period of five years, during this time you will have gained a considerable amount of equity on the home which will help enormously to make a substantial deposit on your next property.

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