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Should You Refinance a Mortgage? A Simple Explanation

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by: No more debt !
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Date: Sun, 5 Jan 2014 Time: 4:39 PM
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Should You Refinance a Mortgage? A Simple Explanation

 

 

This question seems to be a popular one for people who are homeowners and have had their mortgages for some time; "Should we refinance our mortgage?" dances through the mind constantly and doing your own research sometimes adds to the confusion with all the complicated terms and circumstances. So, as a financial services company, we have provided you with an easy explanation to your question.

 

You may be considering a refinance to lower the monthly mortgage payment or to gain access to the equity you have built in your home; these are both very common reasons for wanting to refinance.

 

Here are some things to consider:

 

  • What are your plans? How much longer do you plan on staying in your home?
  • What is your current mortgage rate?
  • What interest rate could you get if you refinanced?
  • Do you plan to pull extra cash from the refinance to put towards other expenses, i.e.  high interest debt that is nondeductible?

 

If you plan on staying in your home at least a few years past the break-even point after getting your new mortgage, then go ahead and refinance at this time. The process for obtaining a mortgage can remind you of the process to get your first mortgage.

 

If you currently have a sizeable amount of equity in your home, you can access that equity to pay for things like other debts that are high interest and nondeductible, pay for a child's college expenses, a home remodeling process, or other important and necessary large expenses, then doing a mortgage refinance can be a really great option for you. Do remember that this is not the only way to access your home's equity but it is a great way to do so. If your reason for wanting to refinance matches one of these, then you are on a good track.

 

Some people use the equity they access via a home mortgage refinancing to pay off things like credit card debt; while this able to be done, it can be scary to put your home security at risk to pay off your credit card debt. If you find yourself doing this, try to not let your credit card debt get so large in the future and leaving yourself this one recourse of action to pay it off.

 

When going through the mortgage refinancing process, remember or at least know that the closing costs will be levied against you.

About the Author

We are a financial services company that serves CA, CO, and VA. Try our mortgage calculator and see real-time mortgage rates.


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