3 Questions To Ask Yourself Before You Refinance Your Home
As interest rates fluctuate and the housing market changes you might be wondering if refinancing your home is the right decision for you. There are many benefits to refinancing your home, which is why many people choose to do it. However, before you make this big decision it is important that you consider a couple things to ensure that it is the right thing for your individual situation. Here are a couple questions to ask.
Would Refinancing Remove A Co-Signer From Your Loan?
One of the biggest reasons to refinance your home is because you need to remove a co-signer from the loan. Many people cannot get approved for a loan on their own, especially first time homebuyers. This means that they need someone who has sufficient funds and credit score to sign on their loan as well. Then as they become more stable they can try to refinance and take the co-signer off the loan.
If you have a co-signer you should refinance. A co-signer always assumes risk when they co-sign so it is better for them to get them off the loan as soon as possible. You should definitely refinance the loan when you are able to get approved for the mortgage on your own.
Would Refinancing Add Closing Costs and Additional Expenses?
In some cases interest rates have dropped and so you might think that refinancing the home would be a great idea. However, before you do you need to look at all of the extra fees and closing costs if you were to refinance. Some lenders will add more closing costs whenever you change the loan. You need to ask yourself if the money that you will save in interest is comparable to the amount that you will pay in fees. In many cases, it is not worth it if you have to pay closing costs again.
Would Refinancing Extend Your Loan Longer Than You Want?
Lastly, you may want to reconsider refinancing the loan if you are close to the end of the life of the loan. If you took out a 15-year loan, and you are in year 13, there is no reason to refinance, even if it will lower your payments. There is a good chance that it will renew the loan and start over the time frame. This means that even though you could lower your payments, you also extend your loan.
These are just a couple questions to ask before you refinance your home.
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