Are you aware that on average home loans are refinanced about every four years? If you have owned your home for more than two years and haven’t refinanced, you should be reviewing your mortgage options.
As years go by, your financial picture changes as do your priorities. Ideally, your home mortgage should also be assessed and if need be, changed to reflect those new requirements.
By educating yourself, you will have the insider secrets and facts needed to determine which mortgage product is perfect for you and the lowest costs to get it. You will have the tools necessary to negotiate and to:
- Lower your monthly mortgage payments
- Pay off your mortgage earlier than planned
- Purchase an investment property with equity you can now access
- Consolidate debt to reduce interest costs and lower monthly payments
- Remodel and update your home like you dreamed of
- Fund education or medical needs
But before you do anything, be aware of all the costs involved in refinancing:
Be sure you know all the costs that come with the refinancing of a mortgage. Check to be sure there are no penalties for paying off your current loan ahead of the scheduled term. Make sure you know all the costs including origination fees, credit and appraisal fees, legal and title or escrow fees, mortgage insurance costs and others. Only after you are sure of all the costs can you accurately determine if refinancing is a good financial decision. Don’t be surprised if you find it takes many years to recoup the costs when comparing the actual difference in your new house payment.
Consolidation of other debts
There can be many advantages to refinancing for the purpose of reducing your other consumer debt. Financially it can make sense to refinance and pay off all your other debts. From a position of cash flow, you can often save hundreds of dollars every month. The real question is how to best manage the bigger picture. Yes, you may save hundreds every month in overall payments, true. But in doing so, you are also extending those debts out 15, 20 or 30 years! Do you really want to pay off your credit cards and auto over 30 years? The best thing, financially, is if you can manage it, to refinance and pay off all your consumer debt but to then take a portion of the savings in lower payments and make additional principal payments towards your mortgage. This will reduce the term you have to pay off the consumer debt.
Frequent and early pre-payments
Paying your mortgage payments more frequently than the general schedule can save you tremendous amounts of interest costs and at the same time reduce the term of your loan. Consider bi-monthly payments as an option and whether or not your lender will allow that sort of payment schedule. One extra principal and interest payment per year can reduce the term of your loan as much as 7 years!
Also, make sure you ask lots of questions and that the lender fully discloses all costs.