Reconsider your decision to refinance unless you are actually saving your dollars

by Pandey

 
Yes, it’s true that low mortgage rates will make refinancing appealing but homeowners should first crunch their numbers before taking the plunge. Interest rates on mortgage loans have been hovering around their historic lows for 5 years. While the present average rate of 30-year mortgage (4.13%) is not the lowest that has ever been, that was 3.35% in 2012 December, since Freddie Mac started keeping records. Everybody is guessing about when the rates on mortgage loans may rise but it seems that this won’t happen now. Well, this could mean that there won’t be a better time to lower your mortgage rate by refinancing. But the question is, will refinance save you money?
Since the last 30 years, we’re still at the lowest rate, according to the National Association of Mortgage Professionals. Who knows what’s going to happen within the next 12-24 months? But the experts also add that before a homeowner takes steps to refinance, he should consider whether or not this is the right move for you. Crunching the numbers is the best step to take before finalizing.
Cash-out refinances – What is it and when to use it?
Do you have a significant amount of equity built up in your home? If answered yes, you can choose to convert the equity into money and in such cases a cash-out refinance can help you. Here are some things that you should know.
What is a cash-out refinance?
A cash-out refinance is when you take out a new home loan for more money than what you owe on your present loan and then receive the difference in cash. A cash-out refinance makes sense during a number of situations. Here are some of them.

• Are you someone who has incurred huge amounts of debt on your credit cards? Do you think that you’re extremely cash poor but house-rich? If the debt consolidation companies haven’t been able to offer you loans due to your poor credit score, you need not worry as you can easily cash in the equity that you’ve accumulated in your home. When you choose cash-out refinance, you can take out a loan of the amount which is equal to your debt amount and then repay your debts.
• When you have enough debt on your student loans and you don’t get other financing options for purchasing or making any other investment.
• When the cost of all other financing is more costly than the rate that you’re getting on your cash-out refinance loan.

How can you use the cash that you get from cash-out refinancing?
The cash-out refinancing proceeds that you get can be used in any way that you want. While many people use this money to pay down their high interest credit card debt, some others may use the money to pay off their other loans. The best part about taking out a cash-out refinance loan is that the interest rates are tax-deductible and you can subtract the interest rate amount from your taxable income. Some other ways to use this cash are home improvement projects, purchasing an investment property, paying for senior health care and paying for emergency expenses.
Hence, when you’re wondering about refinancing your mortgage loan, assess your needs, determine your income and current financial situation and then check the interest rates that you may receive on the new loan. Take the plunge only when you can save a considerable amount of your dollars.