To refinance simply means balancing the cost-savings of a lower monthly payment versus the costs of completing the refinance. Refinancing a home must take full consideration to weigh-out the pros & cons. Should a consumer consider a refinance? The answer is simple because it all depends on each consumer’s particular situation. As a general rule, consumers could use this type of data to make a decision: if the difference in the interest rates will be two percentage points or more, it is likely worth it to refinance. Despite consideration of the fees a consumer may have to pay, two percentage points will save them money if they plan on staying in their home for a substantial period of time.
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General Overview for Refinances
A refinance mortgage is not an extension of an existing mortgage loan – it is a new mortgage loan with a new interest rate as well as payment plan. Some of the most common reasons consumers may decide to refinance is to lower their current interest rate, change their loan type, or even to pull some cash out of their house. Another great reason is that the consumer might desire to refinance to go from an adjustable rate mortgage (ARM) to a fixed-rate.
Is it sensible to refinance again even if a consumer has already refinanced once before? The answer is an unequivocal yes IF the interest rates are falling at a steady pace, it may be well worth it to refinance a second, or even third time. Consumers may even be eligible for a tax-deduction on additional refinances.
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About Refinances
In recent years, the refinance leaders have been offering “no cost” and “low cost” refinancing options which help to eliminate or minimize out-of-pocket costs. The best and likely the only avenue to guarantee a consumer is getting the best refinance rate is simply to compare lender rates as well as options.
Common Questions: Advantages & Disadvantages of Refinances
The premium advantage of this type mortgage is if a consumer wishes to change their loan type. If a consumer has an Interest Only loan or Adjustable-Rate Mortgage that is getting ready to start going up, the consumer should consider a refinance to a Fixed-Rate mortgage loan. This type of loan assures the consumer their interest rate will stay the same without fluctuation.
A main disadvantage is that refinancing does come with associated costs such as appraisal fees, processing fees, administrative fees, etc., and these do all add up. It is vitally important that consumers ensure that the money they would save by refinancing is greater than the amount of money they would have to expend to do it.
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