When to refinance?
In general terms, your mortgage must meet one or more of the following before you consider refinancing your mortgage.
Mortgage rates are low or falling.
The value of your home has increased in value.
You have been making payments on your original 30 year mortgage for a period less than 10 years.
In an enviorment where interest rates are low or falling, mortgage refinancing can offer owners of a house two potential benefits which can help reduce the cost of your loan over time.
1. Reduce your monthly payments while keeping the same term or a similiar payment from your original mortgage.
2. Decrease your time to pay while maintaining the same or similiar payment to your original mortgage.
Equity set in your home.
Refinancing your home can help you build wealth from your home. For example, refinancing could make sense for cash if your home has increased in value or you have a low balance on your mortgage, compared with the current value of your home and have a high level of consumer debt that you would like to pay.
The first years of your mortgage.
In general, refinancing makes more sense in the early years of a mortgage, where payments are primarly to cover the interest. In the last years of a mortgage, when you begin to pay more principal than interest it may be better to stick with the original mortgage. Remember that refinancing will give you a completly new mortgage to pay and will take you back to the top of the cycle paying more interest.
Refinance or get a loan on secured property?
As a rule of thumb, if you have been making payments for less than 10 years on a 30 year loan and mortgage interest rates have fallen, it could be beneficial to consider refinancing. If you have paid your loan for more than 10 years, a real estate secured loan might be a better option to pay debts in cash or convert the equity you have in your home.
Refinancing after bankruptcy.
It is a general conception that refinancing a home after bankruptcy is quite difficult. But you can avail a home loan provided you pay a higher interest rate. Generally, lenders do not prefer taking the risk of offering mortgages to someone who has filed bankruptcy. But there are lenders out there that for a higher interest rate willing to give a second chance, sometims as fast as six months after finalizing bankruptcy.
Filing a bankruptcy case affects your credit status as it reflects your inability to pay your debts. A chapter 7 bankruptcy stays on your credit report 7 years whereas a chapter 13 bankruptcy is on your credit report for 10 years. But this does not mean you wont be getting credit you will just have to prove yourself with a higher interest rate loan.
