Refinancing Information

Refinancing comes with both advantages and disadvantages and both categories should be weighed before making a life changing decision. This article will share what these things are on both sides and should have an impact on what you consider to be important, unimportant and the main focus based on your family’s needs.

Advantages

Below you will find three advantages to refinancing. Compare these things to your goals and what brought you to the thought of refinancing to begin with.

* New terms if you refinance
* Fixed rate mortgage (if you have something different)
* Consolidation

Disadvantages

Below are the disadvantages to refinancing. But one should not look at these alone but should compare both the advantages and disadvantages and make a smart decision.

* Debt must be paid off
* Costs
* Credit history

Now that we have shared just a few of both sides let’s talk about each one briefly. If you refinance your home new terms may be to your advantage because it may allow you to shave off a few years of your original loan. Say if you had signed up for a 30 year mortgage and have leaved in your home for quite some time – refinancing may allow you to shed a few unwanted years under the new terms.

The fixed rate plays into this as well because if your original home loan was adjustable rate now you can switch over to the fixed rate. Both these things are good because you get to pay fewer years and at a rate you know is fixed and not one that has the tendency to fluctuate. What about the credit card debt you may have? Consolidating will allow you to use your home equity line and have one bill instead of several and hopefully this will be considerably less than what you were paying.

Today’s economy has driven mortgage rates to an all time low so refinancing is truly not a bad thought to ponder. As of September 2011, the lowest rate was at about 3.84% and if your original mortgage was for 30 years – imagine how much you would save if you were to refinance at this rate. Just recently it was reported that it dropped to a real time low of 2.5%.

There are perks in which some we covered above but then things like home improvements in which a roof leaking is the number one home improvement that can cost you quite a bit – so refinancing can assist in this area. Then there is the perk where if your interest rate is lower from refinancing – it means you pay a lower monthly rate. You may go from a $1200 mortgage payment to a $900 mortgage payment and the change can be saved for rainy days.

Things you will need to be considered for refinancing is really no different from what you needed when you purchased your home. Income will be looked at so you want to have check stubs handy, at least the last two or three. Have your previous year’s tax return. You may want to go ahead and pull your credit history and have worked on any negative items with a really good explanation (which may or may not work) but all of these things will be taken into consideration if you are trying to refinance.

If married, it is a good idea to sit together and weigh the pros and cons – take a look at both credit reports from all three credit agencies, have income information as described above, ready and in order and then make a decision as to what works for you and your family with today’s economy.