To Refinance or Not to Refinance Your Mortgage, That is The Question by Ron Finkelstein
As interest rates drop, home owners and investors alike pay attention. As a home owner, you know your monthly mortgage payment, you know your interest rate, and you remember, all too well, the closing costs and miscellaneous expenses involved with securing your mortgage. Yet, when surrounded by market conditions that lead to declining interest rates, we must all weigh the benefits with the costs and how those decreasing interest rates affect us.
Declining interest rates may be surrounded by sluggish economic conditions, and that is certainly cause for concern, especially considering the resultant uncertainty of both employment security and returns on market investments. When refinancing mortgages, though, it must be determined whether the initial capital outlay required for the refinance will outweigh the interim advantages of monthly savings that result from lower mortgage payments. If the expenses do not exceed the benefits, then it is certainly advisable to study the matter more thoroughly, in order to determine if a refinance will increase cash flow for you by reducing your mortgage payments, and thereby free-up additional disposable income.
Many financial institutions recommend, as a general rule of thumb, that if interest rates fall 2 or more percentage points below your existing home mortgage, it is worth researching further and consider mortgage refinance. However, this is not recommended and readers are encouraged to see that more as a financial urban myth of the days of old. Today, there are many different types of mortgage refinance loans; middle income families have much more complex investment portfolios today, and have become financially savvy by being creative and juggling a number of different types of loans and cash-producing investments, both short term and long term. Also, unfortunately, many have become victim to credit card lending and practices that have escalated interest expense for an average of 8-10% for decades now.
Here are some questions to ask yourself when you are looking at refinancing a home loan:
1. What is the Current Interest Rate?
2. What is the Interest Rate of Your Mortgage?
3. How Long is Left on Your Existing Mortgage?
4. How Long Will You Keep Your New Mortgage?
5. Will Different Banks Compete and Give You Lower Closing Costs?
6. Does Your Current Mortgage Have A Penalty for Prepayment?
It is important to consider very carefully the basic concepts of home mortgage refinance. You may even want to make notes for yourself to ensure you have a clear understanding of the effect refinancing will have on your mortgage. Will the monthly savings produce any extra cash, for example? When you have reached this point, it would also be useful to run a few hypothetical financial computations with an online financial or mortgage calculator. Speaking about refinancing with a loan officer would be beneficial, as well.
Note: If the value of your currency is decreasing at a historically unusual rate as compared to benchmark currencies, consider factoring in the current and future value of money. A calculator may walk you through this or you may ask your financial advisor to go over it with you.
Ron Finkelstein is NOT a Real Estate Attorney, Accountant or Mortgage Broker. He is merely a small business owner who has paid a lot of money over the years to learn a whole lot about Mortgage Refinance, When an Interest Only Mortgage is Right For You. Distributed by Free Reprint Articles Directory
Article Source: ArticleSnatch Free Article Directory
As interest rates drop, home owners and investors alike pay attention. As a home owner, you know your monthly mortgage payment, you know your interest rate, and you remember, all too well, the closing costs and miscellaneous expenses involved with securing your mortgage. Yet, when surrounded by market conditions that lead to declining interest rates, we must all weigh the benefits with the costs and how those decreasing interest rates affect us.
Declining interest rates may be surrounded by sluggish economic conditions, and that is certainly cause for concern, especially considering the resultant uncertainty of both employment security and returns on market investments. When refinancing mortgages, though, it must be determined whether the initial capital outlay required for the refinance will outweigh the interim advantages of monthly savings that result from lower mortgage payments. If the expenses do not exceed the benefits, then it is certainly advisable to study the matter more thoroughly, in order to determine if a refinance will increase cash flow for you by reducing your mortgage payments, and thereby free-up additional disposable income.
Many financial institutions recommend, as a general rule of thumb, that if interest rates fall 2 or more percentage points below your existing home mortgage, it is worth researching further and consider mortgage refinance. However, this is not recommended and readers are encouraged to see that more as a financial urban myth of the days of old. Today, there are many different types of mortgage refinance loans; middle income families have much more complex investment portfolios today, and have become financially savvy by being creative and juggling a number of different types of loans and cash-producing investments, both short term and long term. Also, unfortunately, many have become victim to credit card lending and practices that have escalated interest expense for an average of 8-10% for decades now.
Here are some questions to ask yourself when you are looking at refinancing a home loan:
1. What is the Current Interest Rate?
2. What is the Interest Rate of Your Mortgage?
3. How Long is Left on Your Existing Mortgage?
4. How Long Will You Keep Your New Mortgage?
5. Will Different Banks Compete and Give You Lower Closing Costs?
6. Does Your Current Mortgage Have A Penalty for Prepayment?
It is important to consider very carefully the basic concepts of home mortgage refinance. You may even want to make notes for yourself to ensure you have a clear understanding of the effect refinancing will have on your mortgage. Will the monthly savings produce any extra cash, for example? When you have reached this point, it would also be useful to run a few hypothetical financial computations with an online financial or mortgage calculator. Speaking about refinancing with a loan officer would be beneficial, as well.
Note: If the value of your currency is decreasing at a historically unusual rate as compared to benchmark currencies, consider factoring in the current and future value of money. A calculator may walk you through this or you may ask your financial advisor to go over it with you.
Ron Finkelstein is NOT a Real Estate Attorney, Accountant or Mortgage Broker. He is merely a small business owner who has paid a lot of money over the years to learn a whole lot about Mortgage Refinance, When an Interest Only Mortgage is Right For You. Distributed by Free Reprint Articles Directory
Article Source: ArticleSnatch Free Article Directory