Refinancing home mortgage should have advantages and disadvantage. Here some several factor so you can determine the advantages and disadvantages of refinancing.
1. Cost
Refinancing fee could be appraisal cost, credit report, administration, initial fee, closing cost, title and insurance cost. Pay attention with this cost if you want have plan to not live for a long time. You should calculate the cost with how long you will stay at the house. IF you plan to stay for a long time, 10 years minimal, this cost is not a big problem for you.
2. Interest rate.
a Lower interest rate is a must when you do refinancing. But, you can say it advantage factor if the rate is lower 2% or more from your previous mortgage. By lowering interest rate, you can lowering your monthly payment and save thousands dollar.
3. Liens/Judgment
Any kind of liens or judgment must be paid when you do refinancing. When you close your first mortgage, this liens and judgment cost would be reducing your equity. This factor is one of the bigger disadvantages of home refinancing.
4. Credit Score
Higher credit score means lower interest rate you can get. generally, most of lender want consumer with 600 or more credit score. If you have below that number, you will get high interest rate.
5. New Term
You can cut off your mortgage term or extend. It depend on your needs.
6. Fixed Rate/Adjustable rate
If your first mortgage using adjustable rate mortgage, doing refinancing could be advantage for you cause you can change your loan interest to fixed rate.
7. Consolidation
If you have two or more mortgage loan, you can consolidate your loan into only one mortgage. It could help you stabilize your budget and making a lot of different in your financial situation.
Hopefully, this article help you determine which factor is advantage or disadvantage for your mortgage refinancing.
