Refinancing a Home Mortgage – What is Right for You?
March 20, 2009 by · Leave a Comment
It was once a general rule that putting 20 percent down on a mortgage was the acceptable amount. Anything less than that was not acceptable. Things have changed and now there are more options than ever. Putting 20 percent down is still a good idea and often advisable, but there are other factors to consider when you decide to refinance a home mortgage.
Only borrow enough money as you can realistically afford to pay back. In most instances, refinance lenders will only allow homeowners to borrow in the area of 33 to 38 of their gross income calculated on a monthly basis. Before you move forward with your plans to refinance a home mortgage, sit down and figure out what you can afford that will not put you in the red.
If you are unable to put 20 percent down on your home then be forewarned that you will be required by the refinance lenders to purchase Private Mortgage Insurance (PMI). The reason for this? PMI is essentially a way to lessen the risk to the refinance lender. You can expect to pay in the area of $100 a month or thereabouts as part of your monthly payment for this insurance. For this reason, if you can come up with the 20 percent you need for a down payment then you are better off doing so.
There were closing costs when you first bought your home and the same can be said the second time around. Closing costs are a part of every refinancing of a home mortgage. You cannot escape them unless you decide not to refinance your home loan at all.
If you are refinancing a home mortgage loan after only a few years of buying your home then you might be able to use some of the original documents and save yourself some money. For example, your first appraisal could still be used in order that you would not have to get another one.
As you set about the task of refinancing a home mortgage make sure you factor in all of these extra costs. Remember that they add up. Refinancing a 2nd mortgage is not a cheap endeavor!
If you have questions then there are qualified refinance lenders who can answer your questions and give you all the information you need in regards to refinancing a home mortgage loan.
