Home Refinancing – Does It Makes Sense For You?

In a tight economy homeowners often turn to home refinancing as a way to use the equity in their house to get rid of high interest debt or change a variable rate loan into a fixed rate while interest rates are relatively low. The lending professionals at US Business Finance Corp always go over the following factors with our clients when they consider refinancing their home mortgage.

At US Business Finance Corporation, our success is only assured by our team of professionals’ ability to help you with your home financing and small business funding needs. We will make sure that we understand all your real estate needs and concerns before offering the financing options that could best fit your needs. Contact our home finance team to review our residential real estate refinance solutions.

First, take stock of your current mortgage:

• Is there a penalty for early pay-off, and how much?
• Would your new interest rate be 2% or more less than your current interest rate(s)?
• If you have a variable rate loan, is there a clause that allows that mortgage to easily be turned into a fixed rate?

Next, is the long-term savings is worth the upfront expenses? How many months of savings on the new payment would it take to pay for the new closing costs? For example, if your savings is $200 a month and closing costs are $2,200, it would take 11 months to hit the break-even point. If you plan on living in your home for several years to come, then a new home mortgage makes sense.

Third, talk to your current lender first if a home loan refinance looks beneficial to your finances for two reasons: they have much of your financial information already and you may be able to save on your closing costs and interest rate.

A refinance caveat: If you are considering a refinance to pay-off credit cards, make sure you also address the underlying situation that built up the credit card debt. Too many homeowners have leveraged their home equity to pay off high interest debt without addressing their monthly spending habits and rebuilt their debt within a few years.

Finally, following the “Get Ready For Refinance” exercises of reducing your debt-to-income ratio and credit card balances to improve your credit score will always benefit your overall financial health even if you do not refinance.

Filed under: Money Matters - Personal, National Economy, Real Estate