Should I Refinance My Home Mortgage Loan?
Why Refinance your Mortgage Loan?
The Fed’s upcoming announcement of ending the program led to expectations of rising borrowing costs. This is the only way of most companies to raise their funds. According to Wilbur Ross, chairman and CEO of the private equity investment group WL Ross & Co, this is the best time to refinance. He shared how he has been trying to refinance the company’s debt for the past year. This is because there is no assurance of a maximum limit to rate increases. However, the rates will not reduce for sure.
Lower loan rate is one of the best reasons to refinance. The usual rule is that refinancing can be done if the interest rates will be reduced by at least 2%. At present, lenders say that a 1% savings is not a good incentive for borrowers to refinance. Lower rates of interest increases savings, pushes up equity rates and reduces the amount of monthly payments.
Debt consolidation is another good reason to refinance. Exchanging high interest debts with low interest mortgage seem to be a good option. However, refinancing does not easily result to financial prudence. The truth is many people who have accumulated high interest debt on credit cards, cars and other bills have a higher chance to do it again once there is credit available.
When this happens, loss becomes higher, refinancing fees are wasted, equity in the house is lost and years are extended to higher interest payments on new mortgage. High interest debt when the credit cards are maxed out is also a possible consequence. All these will result to endless debt.
Refinance rates are lower than purchase mortgage rates. According to a report of the Mortgage Bankers Association, both refinance and purchase mortgage applications increased. There is a decline in volume but the refinance index increased by 2.7%.
