- Lowering your payments is one reason you might refinance a house. To refinance and have lower expenses, focus on the monthly mortgage costs and not the overall cost. You do need to understand however, how much more you will be paying and that spreading out your costs will add more to what you pay in the long run. The point of this kind of refinancing is to help those who can't pay their monthly expenses. You can get a fixed-rate mortgage for 15 or 30 years, which may start your mortgage payment process all over again or you can do an interest-only adjustable rate mortgage (ARM). An ARM might be good if you need more help now and are willing to pay higher monthly costs in the future. ARM loans can be risky if you are not in a position to make the monthly payments when the rate goes up.
- If you are having trouble making a lot of different payments and you have high-interest loans that are adding up in fees and interest every month, a consolidation refinance might be best. When you talk to banks about refinancing, be sure to tell them that you want to consolidate other costs. They will take into consideration your ability to pay the refinanced mortgage considering you will have less other bills to pay. The refinancing company will either give you cash or more likely directly pay off your other bills as part of the loan.
- In some instances, you can actually refinance and save money. If you have a high-interest loan or an ARM that adjusted above what you can afford, in the right market, if interest rates are low you, can refinance and get a significantly lower monthly payment and pay less in interest in the long term. If you have been paying your mortgage for many years you may need to do a 15-year mortgage so you do not add too much interest and undo your savings. You may also want to pay points to accomplish a lower interest rate. Points mean paying to lower the rate. There is an upfront cost, but if you spread it out over time with a long mortgage it can save you money.
previous post