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Advice on refinance timing - The Bills.com Blog
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Advice on refinance timing
Monday, Sep 15, 2008
Question: I built my own home and have a mortgage of $174,000. I also have a second mortgage for $13,000 and credit card debt of $10,000. I have other debt too, but those are the most concerning. The second mortgage ballons in 2010, so my wife and I pay $700 a month on it. We also pay around $500 - $1000 a month on our credit card debt. My house is worth approximately $260,000. I am thinking about refinancing my home for around $200,000. It will cost me $3000 - $4000 in fees and my mortgage will go up $100 month. However, it will free up our monthly income by over $1000. Should I grind it out over the next few years and just pay the second mortgage and CC debt, or should I act now and refinance my home? Forgot to mention that the interesat rate on the new loan would be a little lower than what I have now, but not a lot.
Answer: You should definitely refinance you will recoup your fees in less than a year and have additional interest write off by paying off your credit cards and putting them on the home. You will also benefit from not having to deal with the balloon payment on the 2nd in 2010, rates are historically low and locking it in will give you financial stability in a rocky rate environment.While there are many other guidelines, it's generally your own financial situation that dictates when to refinance. This can be tricky, as there are many factors surrounding refinancing that will have a bearing on whether now is the best time, or whether
you should wait. Current interest rates are very low and it does seem to be a good time to take advantage of the same and refinance to a lower rate. But, before you decide, think about the following factors:
Your Credit History: Even though you have had a loan before, and are now thinking about refinancing it, you still need to have a good credit score to get the lowest possible interest rates and the best deal on your refinance. It is always better to get your credit report from the three major credit reporting bureaus before applying for your refinance to make sure that there are no errors in it, and to get an idea of what your credit score is likely to be.
Prepayment Penalty: Another problem encountered by many borrowers trying to refinance their home loans are early refinance penalties charged by their current lenders. Many loan agreements, especially "sub-prime" loans designed for borrowers with credit problems, state that borrowers must pay a penalty to their current lender if they wish to refinance their loan before the expiration of a certain period defined by the loan agreement. These penalty periods vary from
Your Credit History: Even though you have had a loan before, and are now thinking about refinancing it, you still need to have a good credit score to get the lowest possible interest rates and the best deal on your refinance. It is always better to get your credit report from the three major credit reporting bureaus before applying for your refinance to make sure that there are no errors in it, and to get an idea of what your credit score is likely to be.
Prepayment Penalty: Another problem encountered by many borrowers trying to refinance their home loans are early refinance penalties charged by their current lenders. Many loan agreements, especially "sub-prime" loans designed for borrowers with credit problems, state that borrowers must pay a penalty to their current lender if they wish to refinance their loan before the expiration of a certain period defined by the loan agreement. These penalty periods vary from
loan to loan, but are frequently between two to five years from the date of the original mortgage. Before you attempt to refinance your current mortgage, you should contact your current lender to discuss whether or not your current loan agreement includes a prepayment penalty, and if so, its amount and when you can refinance without penalty. These penalties can be quite costly, and can easily make a refinance loan too expensive to save you money over your previous loan.
You should contact several potential lenders to discuss the loan terms they can offer you on a refinance loan. After speaking with several lenders, you should be able to determine whether a refinance loan is a financially viable option for you at this time.
If you want an introduction to pre-screened mortgage lenders, Bills.com makes it easy to compare mortgage offers and different loan types. Please visit the loan page at https: Mortgage Refinance Quote , and find a loan that meets your needs.
I wish you the best of luck in finding a loan the meets your needs, and hope that the information I have provided helps you Find. Learn. Save.
Best,
Bill
www.bills.com/blog/
You should contact several potential lenders to discuss the loan terms they can offer you on a refinance loan. After speaking with several lenders, you should be able to determine whether a refinance loan is a financially viable option for you at this time.
If you want an introduction to pre-screened mortgage lenders, Bills.com makes it easy to compare mortgage offers and different loan types. Please visit the loan page at https: Mortgage Refinance Quote , and find a loan that meets your needs.
I wish you the best of luck in finding a loan the meets your needs, and hope that the information I have provided helps you Find. Learn. Save.
Best,
Bill
www.bills.com/blog/
Also, make sure to get a free financial health check-up with Bills IQ!
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