There are several reasons why you should consider a refinance mortgage on your home loan. When you refinance your home, you can cut your monthly mortgage payments. In addition, you can tap into your equity, or your home value, in order to pay off other loans and credit cards. This in turn helps you to deduct your mortgage interest from your taxes.
How to Refinance Your Home
Now that you know the benefits with home refinance, let us now go to the steps. The first thing you need to consider when you refinance your home is the current trend in interest rates. Most major Sunday newspapers feature this type of information in their real estate section. Find out the current interest rates from local dailies or online quotes. You can also contact a mortgage broker and speak with a real person about your home refinance questions.
If this is not your first attempt at getting financing for your home, then you probably known that there are actually several types of loans. The second step therefore is to identify the type of mortgage you want - whether it is fixed, adjustable, or a combination of the two. Remember that each type may mean a different set of advantages and disadvantages for your home refinance venture.
The third step is comparison shopping. Compare the new interest rates to that of your current mortgage. To do this, find out what possible monthly payments are being spoken of with your new loan.
You can use the amount you owe on the loan to calculate what the new monthly payment would be by using a financial calculator or an online mortgage calculator. You'll also need to know the new loan amount (current loan amount plus closing costs, such as points, title and escrow fees - unless you plan to pay for them out of your pocket - the new interest rate, and the number of months of the new loan).
To find out how much you can save with your home refinance mortgage, subtract your current monthly mortgage payment from the new monthly mortgage payment. The remaining balance is your monthly savings.
After you get the figure for your savings, divide it into the total cost of the loan, which includes points, title, and escrow fees. The resulting figure is the number of months it will take for you to recoup your investment.
Then finally, determine how long you plan to stay in your home. If you plan to live in your home longer than it will take to recoup your investment, then to refinance your home is probably a good idea.
ABOUT THE AUTHOR
Tony Forster has a keen interest in living debt free having been "up to his ears" before I realized the need to take control. I am compiling a useful online resource at http://www.loan4payday.info enabling anyone to find the perfect money managment for them
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