The siren’s call of a sweet, low house payment may be irresistible to some, but refinancing is not always in your best interest.
When is it a good time to refinance? It’s a great time when you plan to stay in the house for a number of years. Because typically when you refinance, you start over – whether it’s a 10-year, 20-year, or 30-year loan. If you fear losing your job, then refinancing at a lower house payment could be a really good option.
Also shop around for the best interest rate. According to Bankrate.com,
“Borrowers should shop around for a mortgage by comparing the APR (annual percentage rate) of each loan rather than the quoted interest rate,” says Gregg Busch, vice president of First Savings Mortgage Corp. in McLean, Va. “You need to look at the true cost of the loan and compare it to your current APR to make sure you will really be saving one-half point or more on the new loan.”
Busch points out that a lot of homeowners today find out that their home is worth less than they assumed when they have an appraisal.
“Fannie Mae and Freddie Mac have added fees on loans with a high loan-to-value, so borrowers need to re-evaluate the rate and fees before they decide to refinance,” Busch says.
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