When You Should/Shouldn’t Refinance Your Mortgage: 5 Considerations
Mortgage refinancing can be a money-saver, but this benefit doesn’t apply in all situations. There are costs attached to all types of refinancing, and sometimes having a loan with low interest rates can be more costly that maintaining your current plan. The question now is when is it the right time to seek for a mortgage refinancing?
- Take a critical look at your financial situation
This part of the assessment process should not be done in a hurry. Take a critical look at every aspect of your finances and be thorough when examining all the factors associated with loan refinancing. If your existing mortgage is coming close to the end , then there is not need to refinance. You also need to look at the associated costs, including appraisal costs, term of new documents, interest rates, as well as the closing cost of refinancing. Once you have got a figure, compare the overall cost with what is currently remaining in your current loan. This is where you should know whether refinancing is really worth it.
- How long will you be staying in your current property?
This should be very significant to determine whether you need a refinancing. How long you plan to stay in your current mortgage will give you an idea of the type of refinancing you should be looking for.
- Your credit quality score
This is a very important criterion, especially if you are looking at the size of refinancing you need. Your existing debt, income, and credit worthiness will determine whether you need a refinancing or not. Will you be comfortable with the additional debt of refinancing or will it improve your income substantially? These are some of the things you need to consider.
- Find out the value of the property.
If the value of your property has increased substantially over the years, you can take advantage of the current value to generate more income by seeking for mortgage refinancing.
- Can you cope with the hassles and stress?
There are a lot of hassles involved in loan refinancing. Before taking that decision to refinance your mortgage, understand that the process is quite rigorous and might take its toll on you. If you are not ready to give in your resources and time, refinancing might not be the best option for you.
The above are some of the most important considerations to make before refinancing your mortgage. If you are up for the stress, hassle, and financial commitments involved in refinancing, then you should give it a shot if you are confident it will improve your financial situation.