Refinancing Tips

June 25th, 2007 · No Comments

Why Should I Refinance?

The overall goal of refinancing is to save money, it’s that simple. When you refinance your mortgage, you pay off your old loan with a new one, it is like upgrading your computer to a faster, more efficient model. People may refinance for many different reasons, some of the most common are:

To Refinance for a Lower Interest Rate Lets say when you initially bought your home, the best rate that could be offered at that time was 7.00%, you have since been watching the interest rates steadily fall from 7.00% to around 6.00%. Well, now is the time to act! A slight drop in interest can equal substantial savings over the life of the loan. Your monthly payments will be lowered with less money going to interest and more going to the principal balance on the loan.

To Change from an Adjustable Rate Mortgage to a Fixed Rate Mortgage An adjustable rate mortgage can be great, in the beginning, but when rates go up, your payments will increase along with your interest rate. Lets say when you initially bought your home, you were offered the adjustable rate of 5.00% or even lower, that sounds great, but remember if interest rates ever go up, which they will, you will also watch your payments steadily rise. Adjustable interest rates are great for short term savings but for homeowners planning to keep their mortgage for a long time, fixed rates offer better money management. With a fixed interest rate, you can better manage your monthly expense for your mortgage without wondering if the payment will increase soon.

To Lower Monthly Payments When you have either a high fixed rate or an adjustable rate mortgage, refinancing can substantially lower your monthly payments. Remember, even a slight interest rate cut, can yield high savings.

To Pay Off High Interest Rate Credit Card Debt Almost everyone has credit card debt, some more than others. Why not use the equity in your home to pay off those high interest rate credit cards? It just does not make any sense to pay a credit card company 21% when you can pay off the debt using your home equity at a much lower rate, the savings are substantial! Remember, the interest you pay on your mortgage is tax deductible, interest accumulated in credit card debt is not! Always consult a tax advisor.

To Receive Cash-Out Let’s say your child is college bound and you are looking for a way to finance his or her education, or your home is in need of a new roof, or you are looking to take your spouse on a second honeymoon–why not use the equity in your home to fund those expenses! Every time you make a mortgage payment, some goes towards interest and the rest goes towards the principal balance of the mortgage, the more payments you have made the more equity you have! If you use your home equity to finance those necessary life expenses you will also have an additional tax deduction.

To Shorten the Term of the Mortgage When you refinance to a shorter term, you are lowering the amount of interest you pay over the life of the loan. Your monthly payments will more than likely increase, but your overall savings will be substantial! You will build equity in your home much sooner with a shorter term and will drastically reduce the amount of interest you have paid by the time you own your home free and clear.

To Stop Paying Mortgage Insurance If you put less than 20% down when you purchased your home than you are probably still paying mortgage insurance. Your mortgage insurance is more than likely included in your monthly payment with your principal and interest. If you are still paying mortgage insurance and have more than 20% equity than you have a great reason to refinance! Refinancing without the insurance payment is yet another way to lower your monthly payment!

When it comes to refinancing with MortgageStar, your options are endless!. Whether you are refinancing for the first time or have been through this process before MortgageStar has the right program for you. Since we have so many loan programs available, we are able to offer you the best possible program for your situation, our expert mortgage staff will guide you through your decision making process! Contact Info: RhondaCopeland@yahoo.com or call 757-289-9194

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