One of the more important questions many homeowners need to ask themselves when considering refinancing their mortgage is, should I do this now or wait? This dilemma often energizes the homeowner to research mortgage refinancing further or it makes them lean towards delaying it for the moment and concentrate on other areas of their finances.
The initial step in the refinancing process is to have some financial goals. If an individual (or couple) omits this step, a homeowner cannot positively resolve their indecisiveness of refinancing because the homeowner may not fully grasp the concept of planning financial goals. While one individuals' financial goal varies from person to person, the fundamental question to ask yourself is, do you want to achieve long term savings or generate monthly cash flow. Refinancing your property can normally bring you both options.
Once you have a financial goal established, you can now compare and analyze your mortgage refinancing choices such as a lowering your interest rate, or comparing 15, 20 or 25 year loan terms and costs. Either of these options may significantly reduce the interest paid by the borrower on the loan. Logically, when one pays less interest they will realize savings.
For example, Joe Smith has an existing mortgage of $150,000, an interest rate of 6.50% and a 30 year loan. If the loan term is lowered to 15 years the borrower can significantly decrease the interest paid during the loan term. However, when shortening your loan term on a refinance, it will result in higher monthly payments. So, before considering implementing this method, you will need to have enough monthly cash flow to compensate for the higher monthly payment. You can also use an online mortgage refinance calculator for determining your goals. During recent times, homeowners have refinanced to short term teaser rates such as option arms, two or three year fixed adjustable rates loans with high margins and have been burned. These type of loan products do not suit everyone and should be closely examined by a professional and possibly by your tax advisor as well.
If your goal is increase your monthly cash flow, then the overall loan costs may not be a deterrent as having more money available each month in their account. These homeowners who want cash flow may refinance and simply extend their original loan term of 30 years to another one for 30 years. You've heard the phrase, "cash is king" in the financial industry and that applies to these homeowners. This is the most common form of mortgage refinancing and it means a borrower will pay more interest over their loan term but they will achieve their financial objective by having a lower monthly payment and monthly cash flow. One can begin this process by going online to compare mortgage interest rates.
An additional important point for homeowners who are considering refinancing is the fact that interest paid on a home loan is tax deductible. Thus, a borrower who refinances their mortgage may negatively affect their taxes when the refinance results in less interest being paid. A decrease in borrower paid interest will mean a decrease in the tax deduction for the homeowner. Sometimes, when lowering the homeowner tax deduction, it can move the homeowner into a different tax bracket and may result in higher costs in the long term. For this reason, homeowners who are considering refinancing should have their tax advisor analyze any consequences that refinancing may have on their income tax return before making a final decision.
Frank Collins is a real estate investor and an contributor with LoanShoppers.Net
Mortgage calculators - http://www.ijumboloan.com/mortgage-calculators.htm
By : Frank Collins
The initial step in the refinancing process is to have some financial goals. If an individual (or couple) omits this step, a homeowner cannot positively resolve their indecisiveness of refinancing because the homeowner may not fully grasp the concept of planning financial goals. While one individuals' financial goal varies from person to person, the fundamental question to ask yourself is, do you want to achieve long term savings or generate monthly cash flow. Refinancing your property can normally bring you both options.
Once you have a financial goal established, you can now compare and analyze your mortgage refinancing choices such as a lowering your interest rate, or comparing 15, 20 or 25 year loan terms and costs. Either of these options may significantly reduce the interest paid by the borrower on the loan. Logically, when one pays less interest they will realize savings.
For example, Joe Smith has an existing mortgage of $150,000, an interest rate of 6.50% and a 30 year loan. If the loan term is lowered to 15 years the borrower can significantly decrease the interest paid during the loan term. However, when shortening your loan term on a refinance, it will result in higher monthly payments. So, before considering implementing this method, you will need to have enough monthly cash flow to compensate for the higher monthly payment. You can also use an online mortgage refinance calculator for determining your goals. During recent times, homeowners have refinanced to short term teaser rates such as option arms, two or three year fixed adjustable rates loans with high margins and have been burned. These type of loan products do not suit everyone and should be closely examined by a professional and possibly by your tax advisor as well.
If your goal is increase your monthly cash flow, then the overall loan costs may not be a deterrent as having more money available each month in their account. These homeowners who want cash flow may refinance and simply extend their original loan term of 30 years to another one for 30 years. You've heard the phrase, "cash is king" in the financial industry and that applies to these homeowners. This is the most common form of mortgage refinancing and it means a borrower will pay more interest over their loan term but they will achieve their financial objective by having a lower monthly payment and monthly cash flow. One can begin this process by going online to compare mortgage interest rates.
An additional important point for homeowners who are considering refinancing is the fact that interest paid on a home loan is tax deductible. Thus, a borrower who refinances their mortgage may negatively affect their taxes when the refinance results in less interest being paid. A decrease in borrower paid interest will mean a decrease in the tax deduction for the homeowner. Sometimes, when lowering the homeowner tax deduction, it can move the homeowner into a different tax bracket and may result in higher costs in the long term. For this reason, homeowners who are considering refinancing should have their tax advisor analyze any consequences that refinancing may have on their income tax return before making a final decision.
Frank Collins is a real estate investor and an contributor with LoanShoppers.Net
Mortgage calculators - http://www.ijumboloan.com/mortgage-calculators.htm
By : Frank Collins
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