Should You Refinance Your Mortgage if Interest Rates Drop?
Mortgage refinancing is when you take a mortgage of a certain interest rate and term length, and change it for a different interest rate and term. If you are looking to refinance your home loan it is usually done when rates have dropped considerably therefore making it advantageous to do so. When I say considerably it usually means a drop of at least 1% from what you're paying now. If you have an adjustable rate mortgage and interest rates drop, then locking in to a fixed rate loan for a set term is probably a wise decision. This is especially true if rates are on the rise! If you are looking to refinance because you need to pay down other debts, try something else, like a debt consolidation loan. The only time you should refinance for this reason is if you are planning on staying in your home for a few years, and the current mortgage rates are lower than the rates you are paying on your debts as well as your current home loan rate. If mortgage refinancing is something you would like to consider then be sure to ask the lender about the amortization schedule. If it was originally 25 years and you have paid on it for 10 years then you don't want to start over again at 25 years. The amortization should remain at 15 years. You will end up paying out thousands less in the long run. Refinancing when interest rates drop could save you thousands of dollars, but it isn't the best option for everyone. Discuss your options with a professional and discover what is best for you! Chris Rodriguez is the author/publisher of http://www.online-finances.com.
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