Is it Time for me to Refinance my Home?
One of my friends from church was in a conundrum earlier this year. Her husband was in the process of switching careers, and her job was only part-time, so they were starting to struggle with money. One of the most obvious places that they could cut down was their mortgage on their townhome, and a lot of people were pushing them to consider refinancing it. They instead are moving after their home sells (hopefully within the next few months), and it’s not an issue.
What is refinancing? Well, in short, it’s revisiting your mortgage and trying to make your payments per month cheaper by checking out the interest rate, the amount that is still due on your home, and the number of years left on your loan. Then, whoever is in charge of loaning you the money (loan company or other financial institution) takes those numbers, sees if they can get you a lower interest rate based on current trends in the housing market, and gives you a new monthly payment.
If they hadn’t decided to move, would now have been the time to refinance their home? Here are five questions you should ask yourself when you’re trying to figure out the answer to this question.
- Can I afford what I’m currently paying? If you can, it may not be time to refinance. I know that sounds counterproductive, but when you look at the next three questions, you may discover that it’s just easier and more financially stabling to just stay where you’re at.
- What effect would closing costs put on my refinancing? This is where people get in a lot of trouble sometimes. They don’t realize that many financial institutions have fees and charges associated with refinancing, and then you also have to pay closing costs on the refinancing.
- How much is my house worth compared to what’s left on the loan? Many financial institutions will throw fees on you if your home’s current value is significantly different than the amount you had on the loan initially.
- Will I stay or will I go? My friends ended up moving, and if you think there’s any possibility of you doing the same within the next 5 years, refinancing may end up making your mortgage more of a liability than it already is.
- Is my credit stable? This is probably the most important question to ask when considering refinancing your home. Most financial institutions won’t even consider refinancing you unless you have a credit score of 640 or better.
Maybe it is your time to refinance; a lot of people are finding that that is the case in the current economy. After asking these questions, I’m going to suggest you do the one thing that I always tell you to do; do your research! Ask professionals, they know what they’re doing and they will help you to know what the best plan is for you and your family in order to be financially stable.
