Refinancing is the act of paying off one loan by obtaining another. Refinancing is generally done to secure better loan terms, such as a lower interest rate. If you are thinking of refinancing, you should analyze your current situation to find out if refinancing is the best choice for you.
Things you should keep in mind when deciding are:
- Will you lower your interest rate? Compare your interest rate to the current interest rate.
- How long do you plan on staying in your home? If it’s three years or more, you are in the clear.
- Do you have cash for closing? Is refinancing something you can afford at the moment, to gain better terms in the long run? Is the value of your home increasing (good) or decreasing (not so good).
- If you are considering refinancing, also remember that there are a variety of different mortgages. If you plan on living in your home for a long period of time, you may want to consider the traditional fixed-rate 15- or 30-year loan.
- Another option is to choose an adjustable rate mortgage and consider refinancing again in a few years.
- By refinancing, you can choose the perfect mortgage for your needs, which may have changed since you first bought your home.
- Talk with your lender to find the best options available for your unique situation.
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