What are the advantages and disadvantages of refinancing a home if the prevailing interest rates are lower than your mortgage rate?
Many folks refinance their home provided if they can get a lower interest rate. In spite of this, you need to take into account the added expenses. Initially, a homeowner has to pay a loan up-front fee for the processing of a new loan, and you possibly will have a pay-off fee on the old loan. Along with that, you will be charged with attorney's fees, closing outlay, etc.
If you intend to stay in the house for many years, about
longer than three years, you could get back the costs with the lower interest rate (provided the recent rate is about 2 percent below the former one). But if you aim to put the property up for sale someday, you might actually pass up a benefit. Your former loan may be assumable, although if has a higher rate, and the new loan may not be. So if the rates escalate again and you try to sell your house, you may encounter difficulty because the vendee would be required to pay the prevailing interest rate.
Usually, if you plan to reside in your home for a number of years and you could lower the interest rate by refinancing, then it's a good idea.
-----
Do you have other ideas you wish to share? Submit them here on Expertscolumn and earn by writing articles.
