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Should You Refinance Your Home Now?

Posted on | December 13, 2008 | No Comments

It has been well documented by many media sources that mortgage rates are at a four year low.  This can be attributed to many things one of which is the struggling economy.  With an economy in peril it has been financially difficult on many middle to lower class Americans which has a direct correlation to their declining credit ratings.  With a decent credit rating it is very tempting to refinance today.  Therefore, with rates at a multi year low, is now the time to refinance your home?

The first question that must be addressed is the amount of closing costs that will be incurred.  If you are going to save $2 for every $1000 financed, you could save $400 a month if you still owe $200,000 on your mortgage.  If the closing costs are $5000, you would have to live in the house for at least 13 months to benefit from refinancing.  Ultimately, it is ideal to find extremely low closing costs or determine that you are going to be living in the home for a lengthy period of time.

Another major question that needs to be addressed is your current credit rating.  The economy has been very bad over the last year which has caused many Americans to buy on credit – A LOT!  If your credit rating has slipped, it is likely that the rate you want to refinance at is unavailable to you.  Rates do not look like they are going to increase in the near term, so it is a wise decision to work on increasing your credit rating by paying your bills on time and having a balance of less than 50% of the limit on your credit cards.

If possible, now is a great time to refinance due to falling rates, but if you are unable to get the rate you want, there will be other opportunities in the near future.  Just work on getting your credit rating up and be fiscally intelligent during this financial crisis.

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