Should I Refi???

Questions You Should Answer Before Refinancing

Before interest rates rise you may want to refinance your home to pay off debt, get better terms, or cash out equity for reinvestment elsewhere.  Here are a few questions you should ask yourself before you take out a new loan.

1. How Long Do You Plan To Stay In The Home?  If you don’t play to own the home for roughly three years or more after refinancing, it might not make financial sense to refinance.  Ask your lender for a break even – breakdown.
2. Are You Refinancing For A Good Reason?  Taking equity our of your home to pay down credit card debt is risky.  Once the debt is gone away, it is easy to “reload” and run new debt while still paying off the equity line.
3. What Type Of Loan Do You Currently Have?  One good reason to refinance is to get more favorable terms, such as getting into a low fixed-rate loan from a higher fluctuating rate.
4. Should You Reinvest The Money?  Cash-out refinances are cheap compared with other loans, so you may be tempted to invest the money in another home, and rent out your current home.  Or you may want to remodel to keep you home’s value high in the marketplace or to improve its utility.  All investments carry risk, so before you decide, ask your lender to help your figure out the risk vs. reward.

Take the monthly saving amount and divide it into your total closing costs.  This figure represents the number of months it will take to pay back your closing costs.

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