Pros and Cons of Refinancing your Mortgage

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Are you considering refinancing your mortgage? Who isn’t, right? With the mortgage rates making the news every other day, you can’t help but think about it. But is a refinancing right for you? Consider these pros and cons to refinancing your current mortgage.
The Pros
Save Money – This is the main reason that homeowners are refinancing. They want to get a lower interest rate and save money on their monthly payment to the bank. A lower interest rate means a lower monthly payment. If you have a good FICO score and clean credit report, you can secure some of the lowest interest rates in history right now so it may very well be the best time for you to be refinancing.
Loan Period – Another advantage to refinancing your mortgage is to change the loan period. Maybe you secured a traditional 30-year mortgage but have gotten a good promotion, have paid off debt, or something that means that you have more money coming in each month. Refinancing your mortgage to a 15-year mortgage and paying a little more each month can save your literally thousands over the life of the loan. If you can swing it, a 15-year mortgage at a good interest rate may be a great investment in your future.
Get Rid of that ARM – If you were one of those that purchased your home with an Adjustable Rate Mortgage (ARM) then you may want to seriously consider refinancing. This can give you the opportunity to get out from under the looming ARM, which can mean a large balloon payment at the end of the term. This may be your best route to ensure you do not get caught with a payment you cannot handle.
The Cons
Closing Costs – Almost all refinancing requires closing costs. You are stuck with mortgage broker’s fees, appraisals fees, title insurance, mortgage points and even additional fees and costs associated with the refinance. Yes, in most cases, you can roll these into your loan; however, this is not always the best option. If you have only had your home a short time, or you are planning to move in a few years, you may not even get all the closing costs paid off and therefore you will make the refinance pointless. Make sure you do your research before you commit to the fees of a refinanced mortgage.
Life Happens – Life is going well and you decide that you want to speed up paying off your house and go with a 15-year or short mortgage term then…life happens. You lose your job, have some unexpected medical bills, or have a sick relative that needs you in another state and you have to rent out your house or continue to pay a higher monthly mortgage payment when you can’t handle the payment. It can be difficult to rent the house out for the higher mortgage amount because it is above typical rental prices and you can’t pay just a portion of your mortgage in order to pay your medical bills. Be sure you truly can handle the additional payment with a refinance to a short term. Remember, an additional payment toward your mortgage can also be helpful without committing you to a larger required monthly amount.
Remember to consider all the facts before determining whether a refinance is for you. In the end, you will know whether you should pursue refinancing. If you do decide to refinance your home, make sure you check with several companies and get the costs and procedures for all the companies, you may find one can give you a better deal than another can.

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