|
Refinancing Your Loan
By: Kirsten Hawkins
Refinancing your home or property is a big decision that could drastically
affect your financial future, for the good or the bad, depending on how smart
you go about the process. Take the time to explore all of the different
refinancing options you have available to you. Many loan agents offer you
refinancing deals that seem too good to be true, and while most of them seem to
have your best interests at heart, do try to keep in mind that they are not paid
unless they approve you for a loan--and you take it. Refinancing your mortgage
can lower your monthly payments, lower the amount of interest you pay on your
loan, or even shorten the term of your mortgage without having to pay a penalty
for early mortgage pay off.
Refinancing a mortgage usually involves allowing a loan company to pay off your
original home loan in return for you signing a loan contract with them. Most
times, the second loan is more beneficial to the mortgagee, especially for that
present time.
There are a couple of things you want to consider when trying to decide whether
or not to refinance your home loan. First off, a lender usually charges fees on
a point system; the points on your mortgage can range anywhere from zero points
to four, depending on the credit worthiness of the borrower, and the type of
lender you are using. Some lenders may offer a much lower interest rate with a
higher number of points, while others may offer a higher interest rate and only
zero to one point involved. Points are fees that are equal to one percent of the
face value of the loan. A $200,000 loan with three points would cost the
borrower $6,000 up front. A lower number of discount points may cause the loan
to have a higher interest rate than the loan you are thinking of refinancing,
perhaps causing your loan to cost you more in the end.
Of course, when thinking of refinancing, you are going to want to make sure that
it will be in your benefit! The penalty costs of paying off your loan or
mortgage early, the cost of appraising your home, related attorney costs,
settlement fees, and closing costs are all amounts that should be taken into
consideration when one is refinancing. As far as your current loan is concerned,
these are all costs that, more often than not, have already been taken care of
and you could be making things worse for yourself by taking these things on
again, especially if your reason for refinancing is a rather tight financial
situation.
The mistake not to make is to refinance to save your mortgage, to keep a bank or
lender from foreclosing on your property. While sometimes situations like this
are inescapable, borrowers who attempt to refinance their properties and homes
under conditions such as this often end up essentially paying more than they
were, saving their property and possibly harming their credit in the process.
About the Author:
Kirsten Hawkins is a real estate expert from Nashville, TN. Visit
www.king-of-real-estate.com/
for more information on real estate, mortgages, and finding the house of your
dream.
|
