A lot of people are wondering if they should refinance their mortgage or not. If you are considering the possibility of refinancing then you should look at a number of factors. As a rule of thumb, if you can receive an interest rate which is 2 percent less than your current rate, then you should refinance. Sometimes there are some additional costs that you may incur such as closing costs and appraisal fees and title insurance. You need to make sure that you are going to stay in your home long enough to recoup your expenses. If it takes you three years to recoup your expenses and you are planning on moving in a year or two then it make not be worth your while to refinance.
Once you decide that refinancing is the way to go the savings that you realize on finance charges are going to be astronomical over the life of the mortgage. Depending on the situation and the circumstances you stand to save hundreds and thousands of dollars.
Some people may have purchased their home when their credit was really in a bad situation and for that reason they received a less than desirable interest rate. If you can slash your interest rate from 8% to 4% or even 5% then you will be way ahead of the game. After refinancing you are going to notice a significant drop in your monthly payment as well. This type of situation leaves you with several options. First of all you can take the additional savings from the lower monthly payment and ask to have it credited to your principal balance which helps you to pay down your mortgage even faster.
Another option is to take the savings you will have and invest or save it in some type of interest bearing vehicle designed to make you money. Refinancing a mortgage actually helps you better prepare for the future and your retirement if the terms and agreements of the refinance are really favorable.
Normally a title search is done to make sure you have not incurred any additional liens or judgments on the property. If there are some they may have to be paid off but there are exceptions and you should work that out with the mortgage company or urbis. Even after paying off liens you will still be able to build up the equity in your home buy utilizing the strategy above by paying the extra savings towards your principal balance. This is one of the good things about a slow economy, most of the times interest rates will decline in an effort to stimulate the economy and this works to the advantage of those looking to refinance their homes and those in the market as first time home buyers.