Should You Apply for Mortgage Refinancing?
View PDF | Print View
by: marciafreeman
Total views: 195
Word Count: 477
The past month has seen a significant rise in mortgage refinancing applications. Interest rates for a 30 year mortgage are at an almost 40 year low. Many homeowners are hoping to take advantage of the low rates, while others are holding out to see if the rates drop more before they grab an opportunity for mortgage refinancing. Regardless of whether you apply for mortgage refinancing under the current rates or take a gamble, make sure you take a hard look at your finances to determine if you even qualify for a new mortgage. Lenders are requiring much more of their borrowers now. One of the factors that led to the current woes in the housing market was the slack standards many banks had regarding home loans. As a result of the credit crises and decline of the real estate market, lenders have significantly tightened their lending standards. To qualify for mortgage refinancing, consumers must have more equity in their homes now. And credit scores of applicants must be excellent to be approved. That means that, although applications for mortgage refinancing have increased, less are actually being approved than in the preceding years.
Determining whether or not you should undergo a mortgage refinancing can be complicated. First, determine if you owe more on your mortgage than your property is worth. Some homeowners in areas hardest hit by plummeting values are in this situation. You will not be approved for mortgage refinancing if your current mortgage is higher than the value of your home. And many banks are now requiring that you have at least 20 percent equity in your property before you can even be considered for mortgage refinancing. If you have enough equity in your property to apply for mortgage refinancing, then it is time to work the costs and benefits.
First, subtract the estimated monthly mortgage payment with the new interest rate from your current monthly payment. Add up all the fees you will incur by undergoing the mortgage refinancing. Much like you did when you obtained your original mortgage, you will incur costs for documentation work, appraisers, attorney hours and bank fees. Next, try to estimate how long you anticipate owning the property. Take the total cost of the mortgage refinancing and divide by the estimated monthly savings. This will tell you how many months it will take for you to recoup the costs of the mortgage refinancing (know as break even.) It probably is not wise to undergo mortgage refinancing if that number is larger than the number of months you anticipate owning the house. On the other hand, mortgage refinancing may be a good decision if you will break even before you plan to sell the house.
Try this Refinance home loan --
About the Author
For the real scoop on mortgage refinancing, preview www.getsmart.com/refinance.
Rating: Not yet rated