subject: Why Opt for Low Refinancing Home Loan Rates? [print this page] Why Opt for Low Refinancing Home Loan Rates?
Refinancing home loan rates are generally lower than the interest rates on your existing home loans. This decision is usually taken when the current interest rates are lesser than the level at which you took a mortgage loan. This is also useful when you need to free up your cash for investment in other areas. However, refinancing will yield benefits only if it generates adequate interest savings after accounting for the costs involved.
Benefits of Low Refinancing Home Loan Rates
Here are its other main benefits:
* It allows you to benefit from fluctuations in interest rates, as you switch over from a higher interest rate to lower interest rate and lower your monthly payments. Various lenders offer varying refinancing home loan rates; however, you must consider the actual cost of refinancing.
* It allows switching to shorter term loan, thus allowing substantial interest savings. If the rates are lower than your existing mortgage rates and you maintain the same monthly payment, you will be able to pay off the principal quickly.
* You can switch from adjustable to fixed rate mortgages to ensure a stable fixed monthly payment.
Low refinancing home loan rates also allow you to tap your equity in the existing home by getting it refinanced for an amount higher than the current principal funds. The extra funds can be taken as cash from the lending agency and used for some other investments or repayment of some other debts.
Refinancing Home Loan Rates: Factors to Consider
Here are some important factors to consider:
* Consider the amount of savings generated. This requires a comparison of monthly installments in case of the earlier loan as well as the refinanced loan. The switch should generate substantial savings and not a meager amount.
* Consider the total fees and charges incurred for the process. If the fees are substantial and wipe out a significant portion of savings generated, it is best to avoid refinancing.
* Also consider the amount of prepayment penalty on your existing loan. If the penalty amount is too high, it may wipe out all the benefits obtained from the process. In such cases, it is best to continue with the existing loan.
