Refinancing Your Mortgage – How to Start?

Refinancing Your Mortgage – How to Start?

There seem to be a lot of problems regarding mortgage today and to add to it, there is the news that interest rates have been lowered. All this puts our minds in doubt with many people even advising against mortgage refinancing in the current scenario. It is better that you read a few tips about mortgage and refinancing before you decide to go in for it. You are often given the ‘two per cent rule’. Just ignore it.

This is nothing but well intentioned advice, the only drawback being that it tends to lend focus to just one single factor. Here, you are asked to refuse to refinance unless you get your mortgage at a rate that is two percent less than your current interest rate. This rule rather oversimplifies things and a decision cannot be made based on this factor alone. You are probably well aware that refinancing a mortgage is sure to cost you a lot of money. You have to pay fees to your lender and some third parties when closing the new mortgage.

Since you want this process to cut your costs and save you money, you should calculate how long you need to pay up in order to recoup these expenses. To arrive at a conclusion, total all your fees and divide this sum by the savings that you will make with your new monthly payment scheme. Now you arrive at the number of months that are required to recoup the whole mortgage refinance cost. When taking the decision to refinance, it is also very important to consider if you mean to stay in the house and for how long. If you plan to stay for a long time, then this gives you the advantage of having more time to cover the refinancing costs and thus you can start saving money. This makes refinancing your mortgage a much better option.

Quite often, we refinance a mortgage in order to consolidate bills. One of the main advantages in doing this is that you will get a deduction in tax for the interest that you have to pay up on your debt. When you refinance a mortgage just for debt consolidation, you are in fact borrowing more money than you actually need in order to pay up your existing mortgage and you are utilizing this extra money in order to pay up other bills like high interest on credit cards, a car loan or a student loan. Some people settle for an adjustable rate mortgage that resets within a certain number of years. If you are one of these people, you better start thinking about refinancing now.

You may not be able to afford the new payments, so it is better not to let it rest till the last minute. Researching on the subject would be the best option and you had better search for a new person to refinance your loan. The prevailing economic situation vis a vis mortgages makes it advantageous for the customer who has prepared himself well to get the best deal.

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