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Last Updated: Jul 2nd, 2008 - 21:15:22 |
(ARA) – Although no one knows for sure if interest rates are going to go up, down or stay the same, if you need to lower your monthly expenses or find some extra cash, now might be the right time to refinance your home.
The question is not only when to refinance, but why, according to Matt Coffin, president and founder of LowerMyBills.com. “Right now interest rates are low, but even if they weren’t, there may be some people for whom refinancing makes sense,” he says. “The reasons for refinancing can be as diverse as the homeowners who use this tactic to help manage their finances.”
To decide if refinancing is right for you, you’ll need a comprehensive picture of your current financial health and the costs of your current mortgage. You should also know exactly what your objective is. “What do you want to get out of your refinance?” Coffin questions. “Do you want to lower your monthly mortgage payments or cash out some equity to pay off other, higher interest, debt?”
Top five reasons for refinancing include:
1. Spend Less Each Month – These days, life seems to come down to monthly payments. If you are stretching to meet your monthly payments on your mortgage, maybe you need to consider refinancing options. If you can get a lower interest rate than you currently have, you'll be able to save substantially on your monthly payment.
2. Refinancing Your High Interest Mortgage - If you have owned your home for a while -- and you bought it before the interest rates hit rock bottom -- you have a lot of options available that can help you save more money. For instance, even with a simple refinance at a lower interest rate, you will be saving money each month.
3. Refinancing Home Mortgages to Extend Your Term - If interest rates are lower than they were when you bought your home, you can refinance and take out another 30 year fixed mortgage. You are now borrowing less than you had to when you first bought your home, at a lower interest rate, spread out over more time. Your monthly payment is likely to drop considerably. Web sites like www.LowerMyBills.com can help you review all your mortgage refinance options.
4. Moving from an Adjustable Rate Mortgage or Interest Only to a Conventional Fixed Mortgage – Some loan types that worked well for you at first, may not be the best option when interest rates start to climb. Adjustable rate mortgages or interest only loans can be a good way to start out with a lower monthly payment, but the monthly payments can balloon once the initial fixed term ends. Also, interest only loans will not help you build equity in your home. “Refinancing to a conventional loan can save you lots of money and uncertainty in the long run,” says Coffin.
5. Eliminating Other Debt – If you have significant credit card debt at high interest rates, it may make sense to refinance in order to pay off that debt. Not only will the interest on your mortgage be lower than nearly any credit card rate, you will be building equity in your home and can enjoy the tax breaks that come with mortgage payments. “Many people refinance to consolidate debts like student or auto loans because they like the idea of having just one monthly payment,” Coffin says.
To learn more about refinancing, visit www.LowerMyBills.com.
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