Is Refinancing the Right Thing to Do?
- Depending on your short-term and long-term goals, refinancing may offer some outstanding opportunities, such as programs for debt reduction or lowering your mortgage payment. However, you will need to determine whether the costs of refinancing will negate your true savings if you're planning to move within a few years. Using a mortgage calculator you can determine your break-even point and whether refinancing is the right thing to do, based on your goals (see Resources).
- Refinancing could provide an answer for uncertainties about your revolving debt, your credit card balances and interest rate fluctuations, which cause payment changes that disrupt your budget. Refinancing might provide greater clarity if your debts are consolidated within your home loan. A new home loan that has a 30-year fixed-rate mortgage term may prove to be a useful tool toward eliminating high interest rate debt while lowering your typical monthly expenditures.
- Timing plays a huge part in the decision to refinance, as you may want to delay the use of the equity within your home. Some homeowners aim to conserve their home equity for emergencies or medical expenses that may arise. You might want to retain your home equity to pay for college expenses or a future vacation. Other priorities, such as an early retirement, could influence your concerns about refinancing. Your plans should be discussed with a mortgage lender who exhibits compassion toward your goals and priorities while seeking an amicable solution for your needs.
- Market conditions might help you determine if refinancing is an appropriate course of action. You must compare your current mortgage terms against the prevailing market offering for which you qualify. The condition of your credit profile could impact your opportunity to refinance. You can find mortgage approval conditions and lenders online (see Resources). The appraisal value and condition of your home may need to improve before you reach a more optimal time for refinancing. A mortgage professional can provide guidance that helps you decide if now is the right time to refinance.