There are two things to consider when you’re
thinking of refinancing your home equity loan: how much you will
save in lower monthly
payments, and how much it will cost you to refinance the loan in closing
costs. Some companies have recently introduced low-cost refinancing and
even no-cost refinancing, which helps reduce or completely eliminate any of your out-of-pocket expenses
at the time. However, you have to be careful because sometimes you will get
charged with a higher interest rate or some other cost will be included. Make sure to ask the right questions so you get a fair deal.
When you refinance, the rule of thumb is usually that the
interest rate should be about two percentage points below the rate of
your current mortgage for the refinancing to be of any value to you.
You will also have to consider how long you plan on staying
in your home. If you think you’ll be moving in a few years, the
money you might save month to month may never really add up to the cost
of the loan and never show up as savings to you.
If you are planning
to stay another three to five years in your home, then it makes sense
to refinance. This is really an advantage, as you don’t
have to pay out cash by adding whatever points and closing costs to the
loan. This does not mean that you are accruing more debt - it only means
that if you've had your mortgage for a few years, you probably have
reduced your balance by a few thousand dollars so you can put your closing costs onto your new loan and end up with a mortgage
that is smaller and has lower payments.
If you would like to talk to a Home Loan Expert and learn more about home equity lines of credit, refinancing, applying
for a mortgage or a home equity line of credit, simply fill out the form
below for a free, no-obligation consultation.
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