Tips on Refinancing
Tips on Refinancing. Here are some of the most important tips on refinancing, straight from the experts. Mortgage refinancing tips, Home refinancing tips, refinancing FAQ – get all your questions answered here.
Refinancing Second Mortgage
Is it wise to refinance a second mortgage? The main thing to bear in mind is this: interest rates on your second home tends to be higher than that on your primary home. Go through the same questions: what is your monthly savings, what are the refinancing costs, does your loan length increase, and how long does it take for you to breakeven?
If your answers to all these questions are satisfactory, then refinancing a second mortgage would also be a good idea. More often than not, you might even be able to refinance your primary home to pay off your second property.
Mortgage refinancing tips
Here are more refinancing FAQ and home refinancing tips to help you decide if refinancing is a good idea.
Refinancing FAQ 1: Should you refinance to pay off credit card debt?
Yes, it could be an excellent idea, especially since credit card debt is much more expensive. While your credit card interest rate might be 14%, your mortgage interest might only be 5%. Furthermore, interest payments on home equity debt are tax-deductible, while credit card interest rates are not. You can thus save a lot of money by staving your debt in your house instead of in your credit card account.
Refinancing advice: However, a possible major downside is this. If you don’t make your mortgage payments, you could lose your house, as your house is used as collateral for your mortgage. On the other hand, if you were to default on your credit card debt, you would still have a house to live in. The worst that could happen is that your credit rating will be damaged.
Refinancing FAQ 2: Save more for retirement, or refinance for a shorter loan?
This is a common dilemma especially for those who are nearing retirement. Should you put more money into your 401(k) or try to pay off your mortgage loan entirely as far as possible? Generally, paying off your mortgage loans would save you more money. Simply compare the interest rates on your two accounts:
How much return do you earn from your 401(k) each year, and how much interest do you need to pay for your mortgage loan? Your mortgage loan is usually significantly more expensive – it is often better to opt for a higher refinanced monthly payment with a shorter loan length. You can focus fully on building your savings when you have almost completed your mortgage payments.
Refinancing FAQ 3: 15-year or 20-year mortgage instead of a 30-year mortgage?
Yes. Though monthly payments on a 15-year or a 20-year mortgage will be higher, you would usually save much more in the long-run. A 30-year mortgage offers only a slightly lower monthly payment but yet takes much longer to pay off – you should stay away from it as far as possible.
You also save in another important area: private mortgage insurance. As shorter loans are considered smaller financial risks, your private mortgage insurance payments would also be significantly less.
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