Mortgage Refinancing Today – 3 Things You Need to Know
The recent drop in the mortgage rates have left most homeowners with a heavy burden of mortgage debt. In fact, many of them are barely managing to pay their monthly installments as the unemployment rate has risen and many people have lost their jobs. Hence, it is only natural that the homeowners will look for ways to reduce their expenditures. With this purpose in mind, there are many who are resorting to refinancing or even selling their homes in order to clear their mortgage debts.
However, before taking such an action, it is important to understand whether such an option will work out for your situation or not. Refinancing involves shifting the balances on your existing home loans to another loan. Usually, home equity loans are used for this purpose. However, if you do not have sufficient equity in your home or you want to increase the value of your home by making modifications to your home, then you should consider taking a second mortgage or a home equity line of credit (HELOC). This depends on your personal needs.
Before you take up any refinancing or home improvement loan, you should understand how the rates will affect your mortgage repayments. Depending on whether you opt for fixed mortgage rates or variable rates, your monthly repayment amount will vary. The interest rate is the main factor that influences the monthly payments. Therefore, it is important to understand which type of rate is better for you. In general, the higher your interest rate, the higher your monthly payments would be.
On the other hand, there are various factors that could impact the interest rates. One of the major reasons why home mortgage rates are low today is the weak economy at the present time. A weak economy means that people need a bigger lump sum to fund their homes. As a result, the lenders are offering reduced mortgage rates in order to get their money back.
With the current economic situation, many homeowners have opted for mortgage refinance in order to reduce their monthly payments and stretch out their loan term. It is important to assess all your options before deciding on a particular mortgage plan. There are many factors to consider before choosing a mortgage scheme. Here are some of them:
o Are you planning to buy a new house or a property? If you are going to purchase a property, you can opt for a fixed-rate mortgage. In fact, the interest rates are quite low today due to the current global economic crisis. It is recommended to opt for a fixed mortgage plan in order to reduce your interest rates. You can also choose to refinance if you want to raise your property’s value. Today, it is one of the most popular home finance options.
o Are you planning to sell your home? Mortgage refinancing today can help you to either lower your home prices or to pay off your existing debts quickly. It is advisable to opt for this option when you need to obtain cash quickly for whatever reasons. It is one of the best options to get cash for quick home selling.
o How long do you want to stay in your current house? If you plan to stay in your present home for a longer time, it is advisable to opt for an adjustable-rate mortgage rate. This is because it offers you more flexibility in terms of monthly payments. On the contrary, fixed-rate mortgages are generally chosen by homeowners who are ready to stay in their home for a long period of time. Moreover, the fluctuating rates in today’s market affect your monthly mortgage payment and can affect your overall finances.