Is Refinancing A Smart Idea?

With the various fluctuations in interest rates over the past few years, you have no doubt thought about whether or not refinancing your home is a good idea. Countless consumers have done so in the face of favorable interest rates over the past few years, but does that mean that it is always a good idea when interest rates dip? There are some key questions you need to ask yourself when contemplating a refinancing move for your piece of real estate.

Know Your Situation
When deciding on whether a future refinancing move will net you benefits, you must first examine what your present situation is like. That includes all of the factors that play into a loan arrangement, including how long you plan to stay in your home, the terms of your credit loan and the likelihood of getting a favorable interest rate on a new loan.

Obviously, the interest rate you currently hold is and your credit rating are probably the two most important bits of information concerning a possible refinance. If you are able to get a lower interest rate with your current credit history than the interest rate currently on your mortgage, there is a potential (not a guarantee) for savings via refinancing.

Spread Your Options
Competition can ultimately help provide a lower interest rate over the long run, which should serve as great motivation to interview a number of different lenders. While that is a solid reason, landing a lender with terms that are fair to you and that you feel comfortable with is just as valid a reason to interview a slew of lenders.

Help More Than Your Mortgage Payment
Most people hope for a reduction in their mortgage payment amount through refinancing, but there are other benefits to be had through locking in a different loan. Chief among those benefits is the prospect of shortening your loan term to make fewer payments, though it may leave your current mortgage payment the same.

Of course, the benefits here are obvious, basically shaving time off of the duration of your loan by locking in a lower interest rate. It may be more attractive initially to pay a lower mortgage amount over time, but the benefits of paying your loan off sooner could outweigh a lower payment. A longer loan duration piles up more interest on your loan and anything you can do to pay it off sooner saves you from those costs.

Factor In Costs
There are always fees in modifying your mortgage, sometimes wrapped into the cost of your new mortgage. During refinance proceedings, there is also a time and effort cost that must be factored in to deciding whether you want to pursue the possibility. If your new interest rate turns out to be lower only by a small amount, it is possible for certain fees to eat into that amount and possibly make it not worth the time and effort. Factor that additional cost in when deciding whether or not you want to commit to pursuing a real estate refinancing.

In a climate of low interest rates, refinancing your home can yield a host of benefits for your long term payment obligations on your real estate. However, those benefits come at a time and effort cost that must be committed to when you begin to investigate the viability of refinancing.

Make sure you do your homework both on the current state of your real estate loan and the possible future state of your real estate loan before embarking on the process. Spending some time to think about these points before making a full decision can spare you refinancing headaches down the road.

This is another original article by Joe Lane, co-owner of The Lane Real Estate Team at http://www.joelane.com/. Are you looking for an experienced Tri City WA Real Estate agency? With 20 years of service based, business experience, Joe and Colleen Lane work hard to serve home buyers and sellers for the Tri Cities of Washington's Kennewick, Richland, Pasco, and surrounding areas.

Our Guidelines state that you may freely use the article, but only in it's entirety and completely unedited. The article shown above is duplicated in HTML code for ease of use. You may copy the following by positioning your cursor within the box, perform a right click 'Select All', then right click 'Copy'. The copied text can then be 'Pasted' into a text editor (Notepad) or directly into your HTML web page. Thank You.