We all want to save money, and one way to do this is to refinance your home. If done right you can save thousands of dollars in interest, reduce number of months of mortgage payments, and possibility reduce the amount of your monthly mortgage payment. Before refinancing, there are some considerations you should evaluate prior to refinancing as indicated in the following list:
· Do not chase interest rates, and do not refinance more than 3 times during the life of your loan. Interest rates are currently low, and be sure to use criteria that justifies refinancing within the current market.
· Major goal should be to get rid of mortgage insurance. With a FHA loan, mortgage insurance is charge for the life of the loan. Conventional loan the mortgage insurance can be canceled after 20% equity is achieved in your home. If switching from a FHA to conventional loan and still paying mortgage insurance, be sure to determine the mortgage insurance savings.
· Normally should not refinance using the original number of months of the loan, even if you have lower monthly mortgage payment. The smarter thing to do, reduce the term of the loan by making same or slightly higher mortgage payment.
· Consider making extra principle payments on your loan after refinancing. This will automatically shorten term of your loan, gain more equity quicker, and save on future interest. Finally, if paying mortgage insurance, this will allow you to eliminate this insurance quicker.
· Refinancing has closing cost; determine how many months it will take to recoup your expense of refinancing. At the same time, determine whether you will likely live in the same home sufficient amount of time to justify the closing cost.
· Check with multiple mortgage lenders because rates can vary between lenders.
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