refinance: what you need to know?

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Posted in: Business And Finance in aoy's Blog

refinance: what you need to know? by Deepak jain

There are times when it makes sense to refinance your mortgage. It's important to have a clear financial objective in mind so that you're more able to choose the most appropriate loan. Ultimately, the decision is up to you to decide when it's best for you to refinance, based on your individual financial situation.
Refinance from an Adjustable Rate Mortgage (ARM) to a Fixed-Rate
It's important to consider what mortgage rates are doing. Since mid-2004, the Federal Reserve has raised interest rates several times and is expected to keep raising rates in the near future. This means that if you have an adjustable rate mortgage (ARM), it may adjust to a rate that's higher than a fixed-rate mortgage . Now might be a good time to consider refinancing to a fixed-rate loan.
However, you must also consider the amount of time you plan on being in your home. If you're only going to be in your home for a few more years, it may make sense not to refinance out of your ARM. If you're going to be in your home longer than seven years, it might be a smart move to refinance to a fixed-rate mortgage.

Refinance from a Fixed-Rate Mortgage to an ARM Again, you need to consider how long you plan on being in your home. Many people move within nine years so it may not make sense to pay a higher interest rate for a 30-year fixed-rate mortgage when you're not going to be in the home that long. Doing so may be costing you money. Consider refinancing to an ARM instead ? you'll get a lower rate and lower your monthly mortgage payment.

A drop of just one half to three quarters of a percentage point in interest can lower your monthly payment. If you don't refinance, you may be paying too much every month for your loan, and that's never a good financial move. There are a few different ways you can lower your monthly mortgage payment.

First, you can simply refinance to a lower interest rate. A lower rate generally means a lower monthly payment.

Second, you can change the term of your mortgage. For instance, if you have a 15-year mortgage, you can lengthen the term to 30 years. Since the balance of your mortgage is spread out over a longer period of time, your payment is lower. However, if you have a 30-year mortgage and one of your financial goals is long-term savings, you may want to consider shortening your term to 20 or even 15 years. Your payment will be higher, but you will pay much less in interest over the life of the loan, saving you thousands of dollars in the long run.for more information:

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