Should you refinance now?

There are a number of reasons for which people consider refinancing their mortgage. While the idea of having a sizeable sum of extra money can be very appealing, you should carefully consider whether refinancing your mortgage is the right decision, especially during these challenging economic times. Some things to consider:

  • Credit. Credit ratings always are taken into account when it comes time to getting any new loan, including home refinancing. The lower your credit score, the less chance you'll have of getting a low interest rate for a refinance loan.
  • Interest. If you're at all interested in saving money, you should shop around for the lowest interest rates and fees. If you decide to refinance at the right time, you may be able to save quite by securing a lower rate. When shopping around, look for a rate that is at least 2- to 3 percent lower than the rate you're currently paying.
  • Payment duration. Another thing you'll want to consider is how long you'll have to continue to pay on your mortgage if you choose to refinance. If you're close to paying off your mortgage (say, for example, you're in year 23 of a 30-year term), do you really want to start all over again? By refinancing, you could be adding an additional five-, ten- or more years to the duration of your payments in order to get the money you're looking for.
  • Location. Are you planning on moving to a new home anytime soon? If so, when taking into account all the fees and charges involved with refinancing, it may not be financially worth the effort to do so at this time.
  • Cash out? One reason that many people have decided to refinance their homes in recent years has been to get a little extra money to pay other bills. However, you may have other reasons, such as undertaking a home expansion or going on that extended trip the family has always wanted to take.
  • Fees. Make sure that you know what fees are going to be charged before jumping into a home refinance. If very high fees and closing costs must be paid in order to take advantage of the refinancing offer, you may end up losing out in the long run, as you could be charged more in fees than you'll save on the interest remaining on your current mortgage.

If, after these considerations, you still think refinancing is the right way to go, it's important to make sure that you get the right lender for the job. Keep in mind that just because a lender offers you a great interest rate, it doesn't automatically mean that they're the best company to go with. Make sure that any lender you consider is reliable. Search the company's history, and look for any reviews of their services. Check the Better Business Bureau's website, and ask the lender for references. A reliable and reputable company should be willing to give you the contact information for some of their past clients.

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