There are plenty of homeowners who are taking advantage of the extremely low mortgage rates and refinancing their home. But is home refinancing right for you? Your home is your single biggest investment and your single biggest asset so before you take any steps when it comes to refinancing make sure you take the following things into consideration.
Run the Numbers
Don’t take the first offer that comes along, make sure that it makes sense for you. Look at the costs associated with refinancing, how long the new mortgage will be and compare it to how much remains on your current mortgage. Factor in the interest rate you are paying now and how does it stack up against the new rate. There will be closing costs that you are going to have to pay all over again for the new mortgage and how long is it going to take you to recoup the cost of financing? Here is a look at the costs of refinancing.
How Long do You Plan on Keeping Your Home?
Unless you live in a really hot real estate market make sure that you plan on staying in your home long enough to recoup the cost of the refinance. If this is going to be the family home for the long term then great, but if not consider carefully whether you will lose money on a sale.
What is the Value of Your Home
Has the value of your home gone up since the original mortgage was taken out? Does it make financial sense to take advantage of the increase in your home’s value? Are you looking at taking out a larger mortgage to have more disposable cash on hand?
What does Your Credit Look Like?
What is your credit score and what is the amount you’re going to qualify for based on credit score, your income, outside debts and the new valuation of your home. Are you going to be paying more or less overall and can you handle that financially? Don’t forget how refinancing your mortgage will affect your taxes as well. You might want to speak with an accountant before you take this step.
Will it be Worth the Hassle
As much as banks and mortgage companies try and make refinancing easier to do there is still a certain amount of hassle involved. You have to put in time, effort and get together all the necessary paperwork the mortgage company is going to want. Is your reasoning for refinancing sound? You really need to make sure that this is the best course of action for your goals.
Lots of homeowners refinance for all kinds of different reasons, to invest, to pay off debt or to renovate their existing home. But refinancing doesn’t make sense for everyone, just make sure that it makes sense for you.