When to Refinance Your
Mortgage
Pay no
attention to all the gimmicks you see on television. The proper
timing to refinance your mortgage is entirely dependent upon
you and your current financial
situation, nothing more, and nothing
less.
The truth is, all those financial professionals telling you
“now is the time to refinance your mortgage” and “there has
never been a better time to refinance your mortgage” are flat
out lying. Nothing could matter less than the interest rate or
current state of the market. Although those will factor into
your mortgage refinance, it will be negligible at best – and
any professional who tells you otherwise is just trying to
pressure you to refinance your mortgage here and now.
The Right Time
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Eliminating Debt:
Refinance Your Mortgage
An interesting and little
known fact about loans – they
hurt your credit. More
appropriately, having a lot of
loans hurts your ability to get
more, but financial
institutions like it when you
use a loan you already have,
such as a mortgage refinance,
to pay off your outstanding
loans.
Although not every mortgage
broker can make your mortgage
refinance include your other
loans, it would serve you well
to find one that can. The
benefits strongly outweigh any
kind of negative impact when
you refinance your mortgage.
Even though you may have been
looking forward to a lower
payment by doing a mortgage
refinance, you will enjoy
overall lowered expenses across
the board.
How it Works
It really depends on which
lender you end up with as to
whether they can consolidate
your debt when you refinance
your mortgage. However, even if
a lender can take care of this
for you, they may have certain
limitations as to what they can
include in a mortgage
refinance. Ask your broker up
front whether they have a
lender that can consolidate
your particular kind of debt
into the mortgage
refinance.
Once you have found a broker
who can put together the kind
of mortgage refinance you want,
just be sure to bring all the
paperwork. All of your
outstanding credit card balance
information, auto loans,
student loans, and anything
else you might have hanging
around. Once you refinance your
mortgage, you will end up with
one loan and one payment.
In essence, all that you are
doing is paying off all those
balances with your mortgage
refinance, and continuing to
pay on those loans at a lower
rate. The most beneficial kind
of debt to include in your
mortgage refinance are credit
cards. These should be a top
priority for including in your
mortgage refinance because
revolving credit, as credit
cards are, hurt your credit the
most.
Keep in mind, it doesn't
matter if these accounts are
closed or delinquent in order
for you to include them in your
mortgage refinance. However,
some lenders also have a limit
as to how much you can borrow
over your home's value. So if
you're really in over your
head, you may only be able to
get a portion of those loans
included in the mortgage
refinance.
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So when is it the prime time to refinance your mortgage?
Well, pretty much whenever you can, but most especially when it
would benefit you the most. A mortgage refinance is useful for
so many more things than just shortening the term on your home
loan or freeing up money from your mortgage to put into other
things.
Take for instance, your mortgage refinance could enable you to
get out of debt and retire faster. You could also include other
revolving debt, such as credit cards or students loans, into
the mortgage refinance. Although this would not lower your
payments, in the long run, this will save a great deal of money
for you.
It should be noted however, a mortgage refinance is not very
effective as a means to keep your head above water – unless you
are speaking in terms of retirement. If you find yourself
needing a mortgage refinance just so you can make the payments
on your loan, then it is time to get out of the loan, not do a
mortgage refinance.
In a nutshell, the timing of your mortgage refinance is
entirely dependent upon whether it would benefit you the most
at that point. If you know of a debt you will be incurring in
the near future or of more difficult times ahead – such as a
new baby – then you might want to consider holding off and
don't refinance your mortgage until after that point.
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