Is
it Time to Refinance?
What
happens when you set a $20 bill on your front lawn on a windy
day? It blows away. What happens when you don't actively manage
your home financing? It can be akin to putting money on your
front lawn…if you don't consider a mortgage refinance,
advantageous mortgage rates might blow away.
Mortgage interest rates are continually trending up or down.
Excluding all other factors, a fixed-rate mortgage is preferable
when rates are on the upswing, and an adjustable-rate mortgage
(ARM) is the vehicle of choice when rates are expected to drop.
Since fixed rates are relatively low right now, you might achieve
significant cost savings over time by refinancing your ARM to
a fixed loan.
Consider Your Future
It's also important to consider how long you're planning to
live in your home. If you'd like to sell within the next few
years, refinancing an ARM to a fixed-rate mortgage may not be
the right move, even if the interest rate is lower. The savings
you'll achieve with the lower rate may not be enough to outweigh
the closing costs you'll incur. On the flip side, if you have
a fixed-rate mortgage and you expect to sell the home in a few
years, refinancing to an ARM might be a good idea. You can take
advantage of an ARM's low initial payments now, and pay off
the loan when you sell, before your higher rate kicks in.
Consider Your Needs
The state of your finances can always be an overriding factor.
If you need to raise cash, consolidate debt, or lower your monthly
payment, a refinance mortgage may be the most efficient course
of action. Remember, too, that you might be able to use a second
mortgage or home equity loan to achieve the same objective at
a lower cost.
Is it time to do a mortgage refinance? Regardless of the answer,
you've done the right thing by considering the question, and
you won't get caught chasing your hard-earned cash into rapidly
blowing winds.
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