Should I Refinance? Tips to Help You Decide If You Should Refinance Your Mortgage

Should I Refinance? Tips to Help You Decide If You Should Refinance Your Mortgage

Are You Wondering Should I Refinance?

Since rates are dropping down nowadays due to the aftermath of the financial crisis, a lot of people have come out to ask if it’s the right time to refinance. Refinancing can be advantageous to you especially if the savings are significant enough to improve your cash flow.

The additional cash flow can be used to spend on some things that you may want or it can also be invested for a great return thereby further increasing your earnings. The decision to do so can be that pot of gold at the end of the rainbow or an empty pot where you have to pour out some money.

Before You Decide Take Note Of Three Factors

how much you can save on reductions on the interest rate
what are the closing costs
your time line on how long you plan to live in the house.

A lot of people say that you should investigate further if you could bring down the interest rate to as much as 2 points. But right now, experts say that if you could bring down the rate by half a point. On a long enough timeline, the reduction will benefit you because you have the time to recover the closing costs.

You Should Take Note Of The Break-Even Point

For example, if the closing costs amount to around $ 5,000 and due to the exercise you’re able to save $ 200 per month in cash flow, it would take 25 months for you to recover your closing costs. If you’re going to switch houses before 25 months has lapsed, then it may not be worth it.

One tip to reduce the closing cost is to ask for refinancing with your existing lender.

They may be willing to waive certain costs just to keep their business with you. If not, then you have to shop around for someone who’s willing to bring down the rate.

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