Every homeowner faces a difficult situation when he needs to know the right time for home mortgage refinance. As the interest rates keep on fluctuating, its very difficult to time the decision perfectly. But you can make an informed and prepared decision by considering certain things in advance so that you are prepared to make the blow when the interest rate hits an appealing level for your next home mortgage refinance.
Hence we bring to you one of the most tough questions – Should I refinance or not? There are several factors to consider to answer this question such as:
1. Interest Rate – The important thing to know is does the current market offer a lower rate than what you have? If your current rate is as good or close to the type of interest rate you can get then there is no reason to refinance unless you have other valid reasons. As a rule, you need to get at least a full one percent reduction in the rate to consider a home mortgage refinance if the interest rate is the reason for refinance.
2. Relocating – There are fees associated with a home mortgage refinance. Therefore, you need to consider how long you plan on living in the home. If you plan on moving any time in the next few years, it probably is not worth spending the money to get a lower interest rate or payment. Generally, it takes two or three years to break even on the fees associated with a refinance versus the monthly savings it generates for you.
3. Terms of Current Mortgage – Taking advantage of the opportunity to convert your adjustable rate mortgage to a fixed term loan or to reduce your term from a 30 year mortgage to a 15 year mortgage can be a good reason to refinance your home mortgage as well. With low interest rates in the current market, you may be able to get into a lesser term mortgage with little to no increase in your monthly payment. This can save you a tremendous amount of money over the term of the loan.
4. Tap into Equity – One last reason that you may consider a new home loan is to access equity in your home for a major purchase or expense that you have or plan to face very shortly. Regardless of the reason, using your home equity is a good way to access needed money. The interest is usually tax deductible and the interest rates are lower than almost any other type of financing. Hence home refinance can help you solve your need for money in winter days. This also tells you that you need to save this asset until you really need it.
If any of these reasons for a home mortgage refinance apply to you, you can easily find a horde of vendors offering you their services. As home mortgage refinance affects your family and assets, make sure you clearly know when and why to do it.