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Refinancing - Taking the Opportunity Now

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By : Vicki Hat    99 or more times read
Home buying is not an easy and cheap expenditure. People have to raise hundreds or millions of dollar to be able to buy them outright. But thanks to mortgage, people now have the capacity to own a house even if one opts not to make a full payment. They can still have the rights of any homeowner, enjoy the liberties of managing a house according to one's preferences and even use it for gain, even if the pay-off is done in staggered payments.

However, one person needs to evaluate well the kind of mortgage he or she gets. But even if you have carefully evaluated the kind of mortgage obtained, there will still come a time when the current terms and conditions are no longer favorable for you. For one, the interest rates may seem very expensive. If you happen to have lost your job and you are still on the process of looking for one, you may not be able to afford your current monthly payment. Or perhaps, you may want to shorten your loan and increase your monthly payments to ease your financial burdens the soonest.

At times like this, there may be a need for refinancing. This kind of financial decision restructures or replaces your old debt with a new one. There are several types of debt you can switch to which can be advantageous for your part. But most of the time, people refinance to be able to save and to avail of lower interest rates.

When the variable rate has inflated or the current fixed rate seems too high, you can trade them off for a cheaper rate. You can also escape inflation by switching your Adjustable rate to fixed rate. These are the common reasons why people have to refinance.

However, refinancing is not a financial activity that any person should do. One needs to carefully think whether or not to go with such transaction. However, should you want to take advantage of the low rates in the market, here are some points to take note:

  1. Your home equity should be at least 5%. If you know your current equity, all you have to do is to subtract the outstanding balance of your mortgage against the current value of your house.

  2. If you intend to save money, make sure you refinance with a loan that has an interest rate which is lower than 1% of your current rate. According to Fannie Mae, following this rule of thumb helps you obtain a material savings.

  3. However, Fannie Mae also states that number 2 isn't always the case. For one to be able to make sense on refinancing, one has to evaluate the cost involved in doing such transaction. Concurrent to the interest rates, the span of stay to one's house, as well as the closing fees must be evaluated to make sure that your stay would be enough for you to recoup the new cost.

  4. Refinance if your reasons for doing such activity helps you save money, get low interest rates, obtain a loan that improves creditworthiness and use your equity to pay off your other debts.
Find more real estate tips when you visit Phoenix Real Estate, Phoenix Historic Homes for Sale and Real Estate in Queen Creek, AZ.

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