What Is Your Mortgage Refinance Break Even?
Should you refinance your home loan? When the interest rates dropped, many home owners took advantage of a chance to save money. However, lenders still offer some fairly good rates, so you may want to consider refinancing your loan if you did not do it before.
When is a good time to refinance? Every situation is unique, and you probably need to consider a few things before you can decide for yourself. Consider some simple things so you can decide if you should refinance your mortgage.
It seems to be a lot harder to qualify for a mortgage today than it was a few years ago. You may want to look online about today's requirements. A good broker can also help you. Your first move is to see if your own personal credit situation will qualify you for a home mortgage.
Of course, your house also has to qualify. You need to be sure it can appraise for enough money so that a lender will be willing to give you a loan. In addition, if you want to avoid Private Mortgage Insurance, most lenders will require 20% equity. When you get a loan for a new house, that usually means a down payment. If your home is worth more than twenty percent of the loan, you can avoid PMI.
After you have figured out what sort of loan you can qualify for, it is time to figure out if particular loans will be good deals for you.
Many people suggest figuring out the break even point of your new mortgage. Each loan, even a refinance, comes with closing costs and other expenses. They can be thousands of dollars. So you have to figure out when the savings on your monthly payment, from having a lower rate, will match the money you have to spend to get your new loan. You may want to get some help from an online refinance break even calculator. There are many websites with online financial calculators that can help you.
For example, let us say you will save $200 a month if you refinance. However, you will have to pay $2,000 in closing costs. That means it will take you 10 months to break even on this deal. If you plan to stay in your home for longer than 10 months, a refiance should be strongly considered. You may not come out ahead, over time, if you plan to sell your house soon.
Of course, some home owners do not just refinance to save money on their home payments. Sometimes, the short term use of the extra cash you can save on your monthly payment makes it worth it to go ahead and do the deal, especially if you can also finance your closing costs. You may have better uses for your money now, like paying off other debt, that make sense.
Should you refinance? Do your homework so you can evaluate your own unique situation. Then you can make an informed decision.
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Should you refinance your home mortgage loan? Everbybody will have a different situation. Learn what to consider so you can make an informed decision.
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