Factors to Consider before You Refinance Your Mortgage

A Home Buying Article Contributed by Robert Scalia

So You've Decided to Refinance Your Mortgage?

Before you just up an decide to refinance your mortgage, there are numerous factors to consider. What are some of these factors? Well, for starters, you're going to have to consider the interest rate on your current mortgage and the current interest rate that is available on the market.

Once you've done that, you're also going to have to try to figure out just how long you plan to live in your current home and - once that's settled - figure out how much money you're going to need for other home and general life expenses. Remember, your home improvement expenses, car loans and credit cards are not just going to pay themselves off.

Looking at Your Mortgage Refinance Factors in a Little More Detail.

When you decide to refinance your mortgage, the first thing you're going to have to consider is the present interest rate you are paying at the moment. This may sound obvious, but you're going to have to compare that rate up it against the current interest rate to see how much you would save by refinancing your mortgage. The best way to do this, of course, is to use a simple mortgage calculator which you can find online. This should give you an idea of how much you would actually be saving.

Once you have done that, the next step when you refinance your mortgage is to figure out the current market interest rate. Keep in mind that if you want to reap the benefits of a lower market interest rate, you may in fact have to pay fees associated with the loan. The only way you can probably get away with this is if you're lender is offering you a no-fee loan. This is why it's important to discuss the fee options with your loan officer before you make any commitment to refinance your mortgage.

So I've Done My Refinance Mortgage Homework. What Now?

Once you have completed these first two steps, the next important step is to figure out how long you will live in your home. This may seem like an impossible question to answer. No one can predict the future. But keep in mind that the the median length of stay in a home is 8.2 years. If you're not planning to own your home for much longer, the lower payments which are associated with the refinance of your mortgage may not even cover the necessary fees.

On the other hand, if the plan is to stay in your home for a long period of time, refinancing could turn out to be a great way to reduce your monthly payments. And in the event that you are planning to move into a new home while retaining the old home as a rental property, mortgage refinance is an excellent strategy. Why? Because this way, you can lower your monthly mortgage payment and, consequently, increase your rental income.

If you've gotten this far, the last step is to consolidate your bills, especially if it turns out you have several outstanding bills. This will ultimately allow you to pay off all your other debts. And if you have equity in your home, you just might be able to access that equity through what's called a "cash out" refinance.