Refinancing

There are times today when it seems like the best thing to do is to refinance your mortgage

. It is important to have a clear objective in mind, however, so that you are able to choose the most appropriate loan for you. The decision is an individual one, and based upon your person financial situation. There are a few factors that you will want to consider.

To begin, it is important to consider what current mortgage rates are doing. Whether they are rising or falling. This will affect the type of loan in which you will consider and the status of your present loan. If you are currently holding an adjustable mortgage, it will be affected by the current state of the economy by either a rise or fall in the mortgage rate. Now, with the interest rates being low, just may be the time to refinance.

Also to consider it to remember the length of time you plan on being in your home. If you are planning on moving within a few years, than it likely is not feasible to refinance. However, if you plan on being there for more than seven years, it likely is a good idea to consider refinancing.

With the fixed interest rate, if you are deciding to move within nine years or there about, it would not make sense to pay a higher interest rate on a 30 year fixed rate. This is when an ARM would be better to consider. You would actually obtain a lower rate and a lower monthly mortgage payment.

When the interest rates drop this affects your mortgage depending on your loan. However, if you have a loan that is still high compared to the current interest rates than refinancing would be a benefit, as it would bring down your monthly mortgage payment. There are a few ways in which you can lower your interest rate to obtain a lower monthly payment.

You can change the term of your mortgage. Take for example, if you have a 15 year mortgage, than you could lengthen the term to 30 years. This would make the balance of the loan spread over a longer period of time. But, if you have a 30 year fixed loan and you are hoping to achieve saving in the long term, you might consider shortening your loan to 20 or even 15 years. Your monthly payments will be a bit higher, however, in the long run; the mortgage will be less, saving you thousands of dollars.

You can also decrease your monthly mortgage payments lowering them each month if you refinance to an interest only loan. With the interest only loan, the minimum amount that you are required to pay is the interest on a certain length of time. And, there are no penalties for paying as much as you want on the mortgage. So, you get the flexibility to pay less if you want.

It is a personal choice that should be determined after you considered after you have examined all your options.

by: Ethan Sansbury

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