Rules Of Thumb For Mortgage Refinancing
You might think that deciding to refinance a mortgage requires only a quick comparison of loan interest rates. Unfortunately, that s not really true. Refinancing is trickier than that! Fortunately, few useful rules of thumb can often help you make sense of refinancing opportunities.
Rule 1: Don t Ignore Total Interest Costs
You really want to use refinancing as a way to reduce the total interest cost you pay. While that sounds simple in principle, it is sometimes difficult to do. The interest costs you pay are a function of the interest rate, the loan balance, and the loan term period.
When people refinance, they tend to focus solely on the loan interest rate. But they often don t pay as much attention to the loan term or the loan balance.
When you use refinancing even refinancing at a lower interest rate to increase your borrowing or to extend the time over which you borrow, you often aren t saving money.
Rule 2: Trade Expensive Money for Cheap Money(Continue Reading...)
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