Should you refinance your home loan?

Refinancing your home loan is an option that is at least considered by most homeowners during the life of their loan. Refinancing a home loan has many benefits but should be carefully considered. By answering just a few questions, you can help make your decision whether or not to refinance easier to make.

Why do you want to refinance?

There are many reasons for refinancing. Some people want to lower their monthly mortgage payments, others want to take advantage of the equity in their homes, and still others want to pay off debts. Clearly defining why you want to refinance your home loan is critical in determining if refinancing your home loan is really worth it.

Here a few reasons why you should refinance your home

Increasing interest rates- If your home loan is an adjustable rate mortgage then rising interest rates can be devastating. Many homeowners initially select an adjustable rate mortgage in order to take advantage of low interest rates but once those ARM’s readjust, they find themselves struggling to keep up with their monthly payments.

To adjust the term of your home loan- Refinancing your home loan can adjust not only your interest rate, but the term of your home loan. If you can afford to make larger payments at a reduced interest rate then you can reduce the amount of time that it takes to pay off your loan and save a lot of money in the process.

Your credit rating has improved- If you have paid off debts and cleared up past due balances and inaccuracies on your credit, then you should definitely attempt to refinance your home loan. It’s no secret that the higher your credit rating is, the better interest rate you will receive on your home loan. Better credit means better negotiating power.

You now earn more money – If you make more money now than you did when you initially purchased your home, then refinancing may be something you want to consider. The more money that you can put towards your home loan, the less time it will take to completely pay it off. And being able to pay down your mortgage faster means you can then spend that money on something else.

Before refinancing your home loan, it’s important that you know:

• How much your new payments will be?
• How much your refinancing costs will be?
• How long do you plan on living in the home?

Consider all the costs before proceeding with your home loan refinance plans.