Monday, May 30, 2011

Thinking About Refinancing Your Mortgage?

Probably the most optimal time to get a refinance on your mortgage is when you can improve your mortgage terms and lower your cost of borrowing. If you are not improving the terms of your mortgage and you are not actually lowering the cost of borrowing, then it's not a good idea to refinance.

There are a number of ways that you can use to better your existing mortgage terms. So, if whatever you choose to do with your mortgage when you refinance could depend mainly on what you aim to accomplish with this activity. These are some things that people can do to improve their mortgage:

Get rid of PMI. By the time you owe less than eighty percent on the value of your home, the private mortgage insurance fees that you pay will no longer be in effect. If you can show that the value of your home has become greater than the 80% mark during your refinance, you can save money on the PMI which you have to pay monthly. In the long run, all costs considered, people will end up paying 12% for private mortgage insurance instead of paying off a similar rate on their loan.

Cutting down the time for payoffs. Your payoff period is normally part of the mortgage that you signed off on. Currently, the most common terms of a mortgage is either the fifteen year or thirty year term mortgage. However, you can significantly lower the cost of interest payments if you opt for a shorter term. In the long run, you save more money on payments even if your monthly expenses increase.

Decrease the monthly payment. Be careful about this because having lower monthly payments doesn't mean you will get a better deal. It is definitely an option to lower the cost of your monthly payments if you can't afford it. In the long run it helps your credit score and keeps you save from foreclosure. However, longer mortgage payments mean that you may pay more in total. If you can lower your payment costs but keep the same terms, then this is definitely good for you.

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