Tuesday, July 14, 2020

4 Factors in Deciding to Refinance Your Home Before Retirement



As retirement is looming, an idea to refinance your home might be lingering on your mind. You can make the right move using some strategies that will ensure that you remain financially stable. 

Please have a look at the factors that will help you decide whether the idea is viable or not.

Current Interest Rate


If you can lower the current interest rate by 1% or more, mortgage refinancing will be successful. It will make sense since you can pay the loan within a short time. In addition to that, you can build your home’s equity seamlessly with the payment rates. 


If the remaining balance is quite high and you can get a 2-3% reduction on interest, you can go ahead and refinance your home.

Total Refinancing Costs


The cost of refinancing will also play a pivotal role as you make a life-changing decision. Usually, you will cater for closing costs just like you did when you took the initial mortgage. On that account, you have to calculate the expenses to see whether they will favor you or not. 




For example, if you save about $100 per month and the closing costs are $5,000, it will take you roughly 50 months to break even. The need to refinance the loan doesn’t make sense at this point if you intend to move out of your house.

Eligibility


To qualify for the loan, you need to have a stable income and a positive credit score. Therefore, you should look at your financial status to ascertain whether you will get the loan or not. The new underwriting process will dig deep into our cash flow and credit status. It will also look at your home equity concerning the amount that you have.


How Long you will Stay in your home


If you don’t intend to sell the house or move out, there is no need to refinance. It will take many years to clear the debt so that you can start saving again. On that account, you should only take action if you will continue living in your current home. With low-interest rates, you can repay the debt faster and start enjoying the golden years.

Subsequently, refinancing your home is an excellent idea if you can get a lower rate to pay off the loan. Your income, credit score, and home equity play a crucial role as well. Plus, you can benefit from the strategy if you don’t have intentions to sell it.





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