Are you ready to take advantage of the many ways you can benefit from refinancing your mortgage? Maybe you have heard about the huge impact lowering your interest rate can have on both your monthly payment and in the total amount you will have to repay on your mortgage. Maybe you have an adjustable rate mortgage and need to get into a fixed rate mortgage before your rate increase.
Whatever your reason for checking out refinancing options, there are a number of important factors that you need to take into consideration before making your final decision.
The word rate refers to the interest rate of a loan. The word term refers to the length of time you can carry the loan. The shorter the duration of the loan, depending on interest rate, the less interest you will have to pay. Of course, the shorter the duration of the loan, the higher the monthly payment will be.
For example, a person who takes out a 15 year loan with a 6 % interest rate will end up repaying a significantly smaller sum of money than someone who has takes has a 6% interest rate 30 year loan, assuming that the person does not pay the loan off in half the term.
Both rate and term are important considerations when making a decision regarding the best refinancing option for your particular situation. There are some situations in which rate is the most important factor, and there are others where term is more important.
It is very important to avoid getting a mortgage loan with payments higher than what you can afford. If you have to agree to a very short term loan to get a low interest rate, it may not be in your best interest to do so.
The payments are going to be higher on a short term loan than one that is longer. Therefore, if you cannot afford to make the higher monthly payment, you are better of going with a higher interest rate, longer term loan. If your income increases as time goes by, you can always refinance at a later date or simply pay off the loan early to save on the overall interest.
In addition to looking at rate and term, it is also important to take closing costs into consideration when investigating options for refinancing your mortgage. Keep in mind that the primary reason you are seeking refinancing is to improve your financial situation. Dont forget that a lower interest rate doesnt always equate to a better deal.
Do your homework so that you can be sure that your interests are served well by refinancing before you make up your mind about what to do. Each persons financial situation is unique, and you cant decide what is best for you in terms of what is best for other people. By carefully researching your options, you will be able to make a sound refinancing decision.