5 Good Reasons to Refinance Your Home Mortgage
Posted on October 4, 2009
Filed Under Mortgage lending education |
Based on study conducted by the Mortgage Bankers Association of America indicates that every four years Americans take out a refinance loan for their home mortgage. Do You think Itâs a need to refinance your home mortgage as well?
Before making decision whether refinancing is suitable for you or not, first of all itâs important for you to know how refinancing works. For one, refinancing your home mortgage will not cancel out your debt but it gives you the opportunity to do that and more.
Here are 5 good reasons to refinance home mortgage
Invest Your Money
Youâve come up with an excellent business idea but no one wants to take a risk on your proposal. But if youâre really sure about the profitability of your business plan then why not take the risk yourself? Refinance your home mortgage and use the cash youâll get from it to start your own business. You may be the sole investor in the business and it may mean shouldering all the risk alone, but when your business starts generating income, it also means getting to solely enjoy the businessâs profits.
Obtain Lower Rates
Desperate times call for desperate measures and this couldâve been the reason why youâve taken out a loan with outrageous rates in the past. But you donât need to continue suffering when thereâs an option to refinance.
Refinancing allows you to get rid of your old loan and replace it with a better one. Your mortgage refinance loan can come with lower rates, allowing you to breathe more easily because you know you can pay on time and maybe set aside a little more for savings.
Pay for Your Childrenâs Education
Sure, the government promises to fulfill every childâs right to education but the White House as well as your state and local government can only do so much. If you want your child to have the kind of education he deserves, youâll need to contribute your own money for his tuition.
Education, however, is a costly matter. What youâre earning each month may not be enough, but if you refinance your home mortgage, youâll have the means to put your child through college. After that, youâll just have to wait a few years more and then you can reap your rewards when your child returns the favor by paying off the loan. The table will turn and this time, your child will be the one supporting you!
Prepare for Emergencies
Thereâs no way to know when emergencies can take place but things tend to get better when youâre prepared for them. Financially speaking, you can prepare for such emergencies by taking out a refinance mortgage. Whatever happens, having extra cash from refinancing can at least give you a semblance of comfort!
Pay Off Your Debts
Revolving debts are the worst and credit cards are the classic source for them. Refinancing your home mortgage to pay off such debts will be a smart decision on your part. These debts charge exorbitant interest rates but do not offer anything in return as theyâre not investments able to earn profit. They only serve to eat more and more of your income especially when you canât pay on time.
Worse, having too many of such debts can only spell bad things for your credit rating. If you want to free yourself from debts, credit cards should be the first thing to go. Take the first step to financial freedom by refinancing your home mortgage.
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www.mortgagerefinanceadvice.info
and Other resources regarding credit report, visit :
Sutiyo Na
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7 Responses to “5 Good Reasons to Refinance Your Home Mortgage”
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Is it worth refinancing your home to include your car loan to claim the interest on the car loan?
I have a mortgage at 6% and I have been told for tax reasons it is good to refinance the house, just not sure if it is worth the expense to refinance; will it help that much with the interest I claim.
probably not, the re-fi cost is going to offset any gain from interest deduction
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I wouldn’t. Most car loans are for 5 years or less. Even the worst of them are 7 years. Mortgages are typically 15 or 30 years. Do you really want to still be paying off a car 10 years from now that has long gone to the junkyard?
The minimal deduction you’ll get for the added interest is not going to be worth the expense of a refi. And with a 6% loan right now you may even have to step that up a bit for the "privilege" of getting maybe $50 in tax savings. Bad move financially all around, IMHO.
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Impossible to know with this much info. Depends on the interest rate you’d get on the refi, how much is on your car loan, your current tax bracket, the rate of interest on your car loan, etc.
It won’t make sense to roll the car into the home loan if you end up saving a few grand on taxes now, but end up paying several years more of interest on the home loan. If you had a higher interest rate, the refinance might make more sense.
For starters, do an amortization table now and figure out how much you’ll be paying on the lifespan of your current mortgage. Then do another one plugging in the amount you’d pay with a refinance, including the expenses.
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The most it would help is the amount of interest times your tax bracket. If you’re in a 15% tax bracket, your tax benefit would only be 15% of the total interest on the car.
It’s possible but unlikely that the savings would pay the cost of refinancing.
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Your interest rate is VERY good in today’s market. Unless your OVERALL mortgage balance is less than $90k or so, I wouldn’t even consider it. Despite what all the posters are advising, your costs CAN BE minimal. I’m a mortgage broker and costs can be as little as .75% of your loan amount. Escrow and title companies will pass off additional savings called, "short term" rates. Lenders will up your rate to receive a "Service Release Premium" (or rebate), so that you trully have a ZERO cost loan.
You should really take this question to your CPA (or to you tax program if you do your own taxes), as he/you will be the only qualified people to answer this question due to variables such as income, deductions, mortgage balance, … etc. If you have a $200k loan balance on your car at a high rate, then yes refinance. These are obvious solutions.
Bottom line is that you have a VERY good rate on your mortgage now and I seriously doubt you’ll be able to find a lender who will match that rate and pass off a ZERO cost loan to make it cost effective. This is making the assumption that you have a 6%, 30 year fixed rate, with no balloon or variable feature.
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Some good thoughts and concepts above!!
You do not mention if you have refinanced in the past or taken out a prior equity mortgage. Assuming no to either, car loan or no car loan, you can refinance your existing mortgage plus up to $100k in equity and all the interest is deductible. The questions need to be:
Can I get a rate lower than my current mortgage?
Can I get a rate lower that other debt I am paying on?
Of what is left of the $100k, can I earn more than the rate of the mortgage?
Other posters comment about exchanging 5 year debt for 30 year debt is an accurate comment IF you will be in the house longer than 5 years. Otherwise I agree with the one post of totaling all of your current debt payments, comparing that to the new monthly payment of a new mortgage that is used to payoff all your existing debt and compare the savings to the loan costs. That is how I would approach it.
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