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Is It An Appropriate Time To Refinance?
by Kathy Bakeferd

You~ve heard that interest rates are at an ~all time low~
and you figure that~s a good indication that you should
refinance your existing mortgage. You may be right, but
there are some things you need to consider before you
decide to start the refinance process.

The first thing you need to know is the interest rate on
your existing mortgage. Compare that with the interest rate
you can expect to get if you should refinance. If there~s
not at least one and a half to two points difference,
you~re probably not going to better yourself by seeking a
refinance loan. There are going to be closing costs
associated with refinancing, possibly including an
appraisal and fees for closing your existing loan early. If
your new interest rate is only marginally better, it will
take you a long time to recover the cost of taking out a
new loan.

Another thing to consider before you decide that it~s time
to refinance is your future plans. If you plan to only stay
in the house another year or so, you~re probably not going
to be better off with a new loan. If, for example, you
expect your job to require a move or you plan to sell your
house soon for the equity you~ve accrued, you won~t likely
recoup the cost of closing a new loan.

That does not mean that there is never a time when
refinancing is a good alternative. In effect, sometimes
refinancing your loan is an excellent financial
opportunity. Suppose that your credit score was low when
you took your first credit and accepting a high interest
rate was the only way to getting it. This is very frequent
with people who buy for the first time but may be, if you
have made payments on a regular basis for a couple of
years, you have augmented your credit score. If this is
your case, a refinance would be very beneficial and you
will find yourself building equity much more rapidly than
with your present loan.

It can also be that you had requested a loan at a time
when credit and market conditions were adverse, and now it
is a burden for your financial position. If your current
loan has an adjustable interest rate, you~d appreciate
having a fixed-rate mortgage in order to check what the
mortgage payments will be every month. In these last cases
refinancing could certainly be advisable.

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