Is Re-Financing Worth the Hassle?

Some homeowners may never re-finance while others may re-finance frequently. This is a decision which is largely a matter of personal preference. Sure there are some financial benefits which may result from re-financing but for some homeowners these benefits are not worth the hassle of going through a mortgage re-finance. For these homeowners the amount of savings overall or the opportunity to lower monthly payments is simply not worth the effort of investigating the re-financing options, comparison shopping for lenders and paying closing costs to obtain a re-finance.

Are Some Homeowners Just Lazy?

Yes, let?s face it we have all visited a friend?s house to find dust bunnies under the couch or unfolded laundry lying on the floor. However, laziness is usually not the culprit when a homeowner opts not to refinance despite the opportunity for an overall savings or lower monthly payments. In these cases the homeowner may simply decide not to re-finance because they are not confident in making the right decision. These homeowners essentially decide they are happy with their current financial situation and are not willing to make changes which may or may not improve this condition. It is likely that these same homeowners would re-finance their home if all the work was done for them and they were guaranteed an improved financial situation.

Does It Pay to Re-Finance?

This is a question many homeowners may have when they are considering re-financing their home. Unfortunately the answer to this question is a rather complex one and the answer is not always the same. There are some standard situations where a homeowner might investigate the possibility of re-financing. These situations include when interest rates drop, when the homeowner?s credit score improves and when the homeowner has a significant change in their financial situation. While a re-finance may not necessarily be warranted in all of these situations, it is certainly worth at least investigating.

Drops in the Interest Rate

Drops in interest rates often send homeowners scrambling to re-finance. However the homeowner should carefully consider the rate drop before making the decision to re-finance. It is important to note that a homeowner pays closing costs each time they re-finance. These closings costs may include application fees, origination fees, appraisal fees and a variety of other costs and may add up quite quickly. Due to this fee, each homeowner should carefully evaluate their financial situation to determine whether or not the re-financing will be worthwhile. In general the closing fees should not exceed the overall savings and the amount of time the homeowner is required to retain the property to recoup these costs should not be longer than the homeowner plans to retain the property.

Choosing a Lender

Choosing a lender is a very important part of the process of re-financing a home. Understanding the different re-financing options and knowing how each of these options work is very important but none of this matters at all if the homeowner is unable to find a lender who is willing to offer them the rates and terms they are seeking. Choosing a lender can be a long and difficult process but there are some ways to make it easier. One simple way to make it easier is to ask for advice from friends or family members who recently re-financed. Additionally, homeowners can do their own research to determine which lenders are able to offer them the best rate. Finally the homeowner should determine whether or not the finances should be the governing factor in choosing a lender. Surprisingly enough, in most cases it is not.

Ask for Advice from Friends and Family Members

Understanding Re-Financing

Understanding the process of re-financing can be quite dizzying. Homeowners who are considering re-financing might initially be overwhelmed by the number of options available to them. However, after taking some time to educate themselves about the process, they will likely find the process is not nearly as daunting as they had imagined. This article will discuss some of the options available to those interested in re-financing as well as some of the important factors to consider in order to determine whether or not refinancing is worthwhile.

Consider the Options

Homeowners have quite a few options available to them when they are considering the possibility of re-financing their home. The most significant decision is the type of loan they will choose. Fixed rate mortgages and adjustable rate mortgages (ARMs) are the two main types of mortgages the homeowners will likely encounter. Additionally there are hybrid loan options available.

As the name implies, a fixed rate mortgage is one in which the interest rate remains constant throughout the duration of the loan period. This is an especially favorable type of loan when the homeowner has credit which is sufficient enough to lock in a low interest rate.

Re-Financing to Consolidate Debt

Some homeowners opt to re-finance to consolidate their existing debts. With this type of option, the homeowner can consolidate higher interest debts such as credit card debts under a lower interest home loan. The interest rates associated with home loans are traditionally lower than the rates associated with credit cards by a considerable amount. Deciding whether or not to re-finance for the purpose of debt consolidation can be a rather tricky issue. There are a number of complex factors which enter into the equation including the amount of existing debt, the difference in interest rates as well as the difference in loan terms and the current financial situation of the homeowner.

This article will attempt to make this issue less complex by providing a function definition for debt consolidation and providing answer to two key questions homeowners should ask themselves before re-financing. These questions include whether the homeowner will pay more in the long run by consolidating their debt and will the homeowners financial situation improve if they re-finance.

What is Debt Consolidation?