Rule of thumb says go for Refinancing when the new interest rate is 2 points lower to your existing loan interest. But the refinancing cost dropping in over the years is fast making this 2 point rule obsolete. In the present scenario, it is advisable to go for refinancing even with 1 point lower interest rate. Refinancing has many benefits that make it worth considering.
Refinancing can help you to lower down your EMIs, sometimes significantly. If chosen, you might be able to build faster equity in your home and cash that equity out and use it to improve your home, consolidate your debts, take a vacation or meet any other personal requirements.
Besides lower interest rate advantages, refinancing can also be done to switch over from adjustable rate mortgage to fixed rate mortgage. The change over can help you to get the advantage of lower interest rate through out the loan term. At the end of loan term you will be saving a significant amount, which otherwise would have gone towards the payment of interest.
Refinancing can also be one of the important tools to shorten the length of your loan life. If you continue to pay same EMI even after refinancing, you will be able to reduce the length of your loan life. It means a 30 years mortgage can be reduced to 20 years or as desired.
Its wise to stop paying premium for mortgage insurance by getting your mortgage refinanced. If you purchase a mortgage with less than 20% down payment, you need to get your mortgage insured. As the value of your home appreciates the equity also increases. Decrease in your loan amount further raises your equity. When your equity exceeds 20% of the property value, the insurance on your mortgage automatically gets cancelled (Homeowner's Protection Act of 1998)
Refinancing is a good option to consider as the interest rates may change even more than once in a day. A watchful eye on the market trends may help you save 1000s of dollars. Internet is a good platform to find lenders offering refinance mortgage at lower rate of interest. Surf, find, calculate, compare and choose the right one for you.
The author Sara Adams is working with a company providing help to people who are looking for Mortgage Loans, for further help on Mortgage- Refinance visit Apply4less
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