Things You Need to Know About Refinancing
Refinancing is designed to lower your monthly payments on your mortgage loan and ensure that you are able to save the maximum amount of money over time. But despite it’s obvious benefits, it is still a complicated process that involves keeping up to date with current information regarding the methods used to refinance, refinancing law, and other pieces of knowledge that come from learning as much as you can about refinancing before deciding whether or not it is right for you.
Refinancing is a constantly changing lending tool that can benefit all homeowners across the nation. Here are several facts about refinancing that may provide you with information you can use to help make your refinancing decision.
Facts About Refinancing
- Benefits of 2 to 3 Years
These days, owning a home is as much an investment as it is a place to live. As such, many people purchase a house that they only plan on living in for a short period of time. According to various estimates, it is recommended that you only refinance if you are planning on staying in your home for at least two to three more years. Only by doing so will the amount you spent to refinance (often about $3,000) be covered by the amount you saved. So if you are planning on moving any time in the near future, refinancing is not an option to consider.
- You Have 3 Days to Cancel
Refinancing law in the United States allows you 3 days to cancel any transaction that uses your home as collateral, so if you change your mind at the last second, you still have 72 hours to legally cancel the loan. Cancellation can still be a difficult process, though, so try to do all of your research ahead of time. If you do not get a form from your lender designed to allow you to cancel within that time period, send a signed, dating letter requesting cancellation and make sure you have proof of both that letter and its postage.
- Beware of Scams
Refinancing is fraught with scams. Lenders try to sell you on various interest rates without allowing you to read the fine print or recognize the high cost of fees they have associated with your loan. It is always a good idea to go with a company that you know is trustworthy if possible. If you end up having to pay just slightly more in order to ensure that the lender you are using is one you can trust, you should do so.
- Only Mortgage Refinancing Should Use Your Home as Collateral
There are a variety of options with refinancing that may sound very appealing. For example, you can refinance your credit cards or your car using the same refinancing loan as you do your mortgage. But you never want to risk putting your home up as collateral by adding to the existing debt on your house. Only your mortgage should be based off your home’s value. If you need to refinance other items, consider an unsecured loan instead.
- Try to Avoid Variable Rate Loans
Variable rate loans can have a variety of benefits, but when you are refinancing your home loan, you are very likely doing so because the current interest rate is such that it represents a great value. Try to fix into that rate instead, and then if somehow the interest rates lower considerably more over the next few years, you can reevaluate your loan at that time and see if refinancing is yet again right for you. Variable rates may rise up to higher levels than your initial loan, making the refinancing worthless.
Know Your Facts About Refinancing
Refinancing is valuable, and not something to take lightly. It is very important that you keep an eye out for scams, know your rights, and make sure you do all of the mathematics involved in ensuring that you truly gain considerable value from the refinancing loan you choose. Only by carefully considering every aspect of refinancing should you consider it a viable financial option, regardless of the obvious benefits it has on your home value and your wallet.
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