Should I Refinance my House?

July 10, 2013 Marc Edelstein FHA mortgages in Michigan, Michigan Mortgage Banker, Michigan Mortgage Lender, Mortgage Refinancing, Mortgage Tips, Oakland County Mortgage Banker, Wayne County Mortgage Banker 0 Comments

Should I Refinance my House?With interest rates steadily declining over the last two years, and finally hitting all time lows recently, it is no wonder so much attention is being paid to refinancing. Refinancing is, basically, just trading your existing mortgage in for a new one with a different rate and term in an effort to lower your costs.

There are many potential benefits of refinancing, but the primary benefits include taking equity out of your house, lowering your monthly costs, and lowering your total loan costs. The first benefit, taking out equity, is pretty self explanatory. With an FHA refinance, you can take up to 85% of your home’s value back out as cash. This, then, gives you access to far more money than any home equity loans or lines of credit will, and at a more competitive rate. If you need to do some home improvements, consolidate debts, or have any other need for a large amount of cash, this might be a great option.

The next benefit, lowering monthly costs, is also pretty simple. If you are paying $1000 per month and can lower your payments to $800 per month,  a savings of $200 per month,  which is additional money that will be available to pay other bills, or to spend discretionarily. Now, this can be accomplished in one of two ways with a refinance: you can either lower your interest rate or extend the term. If you lower the interest rate, it lowers the monthly payments because there is a smaller monthly interest obligation. If you extend the term, the monthly payments go down because you are giving yourself a longer period of time in which to pay off the remaining balance. Either way, you are helping yourself monthly to pay your bills.

The last benefit, lowering your total loan costs, can be done by either lowering your interest rate or shortening your term. In either case, you are going to pay less interest over the life of the loan, meaning you will save money in the long run. Last week, for instance, I finalized a refinance for a customer in Canton who will save almost $100,000 by lowering his interest rate and shortening the length of time he has left on his mortgage. That was a great mortgage success story, and while they are not all like that, it is good to know what is possible.

If any of these benefits are appealing to you, and you think there is a chance you can take advantage of the lower rates, then a refinance might be a good option for you. If so, please contact me and I will help you understand what your individual options are. And if you have anything else to add to help readers decide if they should refinance their homes, please leave a comment.

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