Refinancing YourMortgage;
Is It Too Good To Be True?

Refinancing your Mortgage: Is it too good to be true? Many mortgage lenders advertise the idea of using the existing equity in your home to pay off your credit cards and other debts. This is very tempting, but such a decision should not be entered into lightly. Refinancing your mortgage should only be done after a careful evaluation of your financial situation.

Interest’s rates for home loans and refinances are currently very low. Refinancing your home loan currently will leave you with extra money each month. However, you may also pay more interest in the long run. If you’ve paid for ten years on your original 30 year mortgage, and refinance now with another 30 year loan, you’ll be paying an extra 10 years of interest.

The key is to refinance in a smart way to actually save you money. Make sure to refinance when the going rate is at least half a point lower than your current rate. This way all of your fees and costs associated with paperwork are worth the costs. Also, make sure that you refinance at a fixed rate APR. This means that even when national interest rates rise, the interest rate on your new loan will not.

If you do refinance and have a few extra hundred dollars less in house payments, make sure you do something wise with that money. Consider rolling those funds into a long-term savings account like an IRA or a 401(k). Since you are used to paying that money in your budget to begin with, you won’t miss the funds each month. Additionally, that money will have a better impact on your finances than if you simply spend that money each month on non-necessities.