Refinancing Your Home

What is refinancing? Refinancing is the process of paying off an existing loan by getting a new one, using the same property as collateral to guarantee the new loan. The primary objective of refinancing one’s home is to SAVE MONEY. How or what to save, however, is totally up to you.

There are two ways by which you can save money through home refinancing – saving on monthly payments and saving on interest.

For the first option, you refinance in order to avail of a lower-rate mortgage with lower monthly payments. However, this does not necessarily mean a shorter loan arrangement. So basically, your objective here is to pay less each month for your mortgage so that you have more cash in your hands each month.

On the other hand, if you wish to save money on interest during the entire term of the loan, should refinance in order to take advantage of a lower-rate mortgage even though it means having a shorter term and higher monthly payments. With this option, your monthly payments are higher BUT you pay off your loan faster.

The Costs of Refinancing

Refinancing is not just all about savings, there are also costs associated with it so do factor that in when you are thinking of refinancing. For instance, there are several fees associated with refinancing that total to thousands of dollars. These include loan application fees, title search fees, appraisal fees, loan origination fees, credit check fees, lawyer’s services, recordation fees, and more.

There are three reasons why you should take this in consideration early on in the refinancing process. First, do you have this amount of money? Second, will it be worth your “projected” savings? Lastly, how long will it take for you to recoup this cost?

Refinancing – Should You or Shouldn’t You?

Financial experts will tell you that refinancing is not for everybody. Just because it worked out for someone you know, doesn’t mean you have to follow suit. Understand your current financial situation especially the terms of your current mortgage and see how you would indeed benefit from refinancing or if you’d benefit from it at all.