Is Refinancing Your Home a Smart Idea?

Approved refinancing agreementHome refinancing is the process of trading in an existing loan and getting a new one in its place. Many people choose to do so because they can get one with better terms like lower interest rates and shorter payment periods. Refinancing also lets you as a homeowner to access built up equity and use this money to pay off debt.

Things to consider when refinancing

Interest savings: There are quite a few online calculators which can help you figure out how much you will save over a period of times.

Tax repercussions: Refinancing will help to lower monthly payment, but it also results in a lower tax deduction. A lender can help you figure out the process and decide.

Refinancing costs: Be aware that refinancing is getting a new loan and there are costs attached. Many Ogden-based lenders, such as, can give you the cost breakdown on the new loan.

When you divide refinancing costs by your after tax-savings, it will give you an insight into how many months it will take you to break even on costs. If you intend to stay in the house for a period longer than the break even point, refinancing becomes viable.

Refinancing makes sense if you are on an adjustable rate mortgage. Initially, ARM rates are low, but over time, they can become very high as they are tied to the market. Fixed rates, even if they are high, help you to stay in your home and have set monthly payments.

Why people choose to refinance

Many people choose to refinance their mortgage when interest rates are low so that they can pay down their debts. Refinancing must be carefully considered before you choose to go through with it. It is useful in reducing payments and building up equity in a home. It is also a great tool to get control over your debts.

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