Choosing to refinance your existing mortgage or home loan
can be a wise and profitable decision, as you will likely
be able to take advantage of lower interest rates from a
different bank or lending institution.
It is possible to save hundreds or even thousands of
dollars every month, but the trick is knowing what you need
to do in order to have everything structured in the best
possible manner to minimize your total cost.
If you are reading this, there is a good chance that you
already have a mortgage, and you know that the size of your
monthly payments depends upon the total value of the
mortgage as well as the interest rate to which you and the
bank agreed.
If you have a fixed rate mortgage, it will be easier for
you to figure out whether refinancing your home loan will
be a good option for you. If you have an adjustable rate
mortgage, the calculation may vary but you should still be
able to get a good idea of where your current interest rate
is and what direction it will be headed in the next few
years.
Most people pay attention to only the interest rate when
looking to refinance their mortgage, but this can be a
misleading methodology for a few reasons:
First, more important than just the interest rate is the
TOTAL amount of interest that will eventually be paid back.
To illustrate this point, let's say that you got a $500,000
mortgage and you agreed to a 30-year period and a fixed
interest rate of 9%. It has already been 18 years, so now
you have only 12 years of payments left.
Now if you were to refinance this, you could get a new loan
with a 5-year term, and even if you had an 11% interest
rate with this new loan, you will still pay back less total
interest. This is important to realize as it will save you
more money in the long run, and if you are a person that
only looks at the interest rates then you might not see the
potential benefit of a refinancing situation such as this.
The point here is that even though the surface interest
rate may be higher with a refinanced loan (regardless of
whether it is fixed or adjustable), you may still be paying
back LESS total interest over the term of the loan.
What your goal should be in terms of your home loan or
mortgage is to minimize the amount of total interest that
you will pay back to the bank, while making sure that the
interest rate and time-period you have chosen will make
your monthly payments as comfortable as possible.
You would not want to over-extend yourself financially by
creating monthly payments that are too large, but at the
same time remember that the smalle the payments are (and
the longer the time you pay them) the greater the total
amount of interest repaid will be.
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If you are looking to refinance your mortgage or home loan,
learn some strategies that the banks do not want you to
know at http://www.YourRefinancingSolution.com
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