Should You Refinance Home Loan Today?

You got your home through a loan a couple of years back. It seemed like the best thing to do since you have a growing family and you needed to put a roof over their heads. Times have changed and you are in different circumstances now than you were before. A question rises to your mind and you ask yourself the question, “should I refinance home loan today?”There are a couple of things that you should consider before going through with it. Perhaps the first and most important would be the reasons you should get a refinance. Listing them down in a piece of paper should help you see the problems, situations, and also the advantages that would make you even think of getting a refinance.Lower Monthly PaymentsThe first entry on your list or anybody’s list would be to lower monthly payments. Everybody would love to have that. So how can you, if it is possible, lower monthly payments by getting a refinance home loan? The answer would be by getting lower interest rates.Back when you first got your loan, the interest rates may have been high, but you took it, anyway. Now, the interest rates have gone down significantly, making you wonder if it’s low enough for you to save on a refinance.As a rule of thumb, you should only refinance when the interest rate is lower than 2% of your current ones. Together with other factors such as staying in your home for then next couple of years, you should be able to lower your monthly payments and save from a refinance home loan.From ARM to Fixed Rate MortgageYou may have taken an adjustable rate mortgage (ARM) back then. It is quite tempting over the fixed rate mortgage since the monthly payments for this is usually lower at the beginning of the loan. But as it matures, your payments would also gradually increase, depending on the current interest rates.You may have never had a stable monthly payment where you were able to predict what the numbers would be even before you opened the envelope. It was bearable back then, but now you may not be able to cope with your bills that seem to rise and fall according to it’s whims.With a refinance home loan, you will be able to switch to a fixed rate mortgage, making sure that your monthly payments will stay the same from the start to end of the loan. This would prove to be an your advantage, especially if you are on a tight budget.From Fixed Rate Mortgage To ARMThere are also situations wherein you first applied for a fixed rate mortgage and now you want to switch to an ARM. People would think this an odd move, but what they don’t know is that it can work to your advantage.Say you are planning to stay in your house for a few more years. You can save from your loan payments by switching to ARM. This would only help you for the short-term, so better be sure that you will only be staying in your house for a year or two.Make sure that you also get an option of “no out-of-pocket costs” ARM. You will be having a slightly higher interests rate but with no closing costs, making you reach your goal of saving on your monthly payments now.Study The ListOnce you have made your list of advantages and disadvantages of getting a refinance, study them. If the longer list belongs to the side of the advantages, then you should go ahead and get a refinance. If it isn’t, then you should leave your mortgage be, for now.There are many reasons to get a refinance home loan. When everything has been laid out before you, it is still your decision if you should go through with it. Just remember that, whichever way you go, you have to make sure that it is for the best.