A lot of people choose to refinance their loans to take advantage of reduced rates in order to lower their payments or to obtain a shorter-term loan. Individuals may want to refinance their existing loan or mortgage for several reasons.
One reason why several people opt for refinancing is to reduce their interest rate and, as a result, lower their payments. It is imperative to pay attention to upfront costs of refinancing against the likely savings in their monthly payment. A frequent rule of thumb is to attempt to recover the cost of refinancing within two years.
Another reason why individuals decide to refinance is to reduce their mortgage term in order to pay off their loan faster. When existing market rates of interest are lower than the present mortgage rate, refinancing to a shorter-term mortgage can save individuals a really large sum of money in interest costs over the life of the loan. This may be the case despite the fact that the monthly payments stay the same, or increase. Equity will increase faster, and an individual will also be in a position to pay the loan sooner.
Another motive behind refinancing is to liquidate equity to take 'cash out' of the property. For individuals, borrowing against the equity in their home can be a low cost and more often than not a tax-deductible way to get needed cash. The rate of interest on mortgages is often less than other forms of consumer loans, and the probable tax deductibility of the interest can additionally lower the 'after tax' cost. On the other hand, although individuals may save on their payments every month, there is a possibility that they may incur more interest costs over the term of the loan owing to the longer term.
It is very important that individuals compare the short-term advantages with the long-term costs. It is advisable that individuals consult their financial advisors for all the necessary details of refinancing keeping their present situation in mind.
ไม่มีความคิดเห็น:
แสดงความคิดเห็น