When Is Refinancing A Smart Financial Move?

If you've had the same mortgage provider from the very first day that you purchased your home, it might have never occurred to you to refinance. It may seem easier to maintain the status quo. Maybe you think refinancing is just as difficult as getting original financing. Or, perhaps you feel a sense of loyalty to your mortgage provider. While these are all valid concerns, they should not stop you from getting a refinancing loan if it makes financial sense for you. Here are a couple of situations where a refinance equals big money savings for you.

When You Have an Adjustable Rate Mortgage

Adjustable rate mortgages can seem ideal at first: You can secure an adjustable rate mortgage for less than the current market rate on mortgage loans. This means that your payments will be lower -- maybe even significantly lower -- than they would be with a fixed rate mortgage.

The problem with adjustable rate mortgages is that those low payments don't continue forever. There is a fixed term, which varies by lender, during which you are guaranteed that rate. After that, your interest rate will be adjusted depending on the current market rate. If rates go up, so will your payment. This means that your payment could sharply increase at any time. While it could also decrease, the bottom line is that it's a gamble.

If you feel that you just couldn't afford a potential upwards spike in your mortgage payment, remortgaging with a fixed rate makes smart financial sense. You will have the security of knowing exactly how much you'll pay each month for the duration of the mortgage.

When You're Behind on Your Mortgage Payments

Although most mortgage loan providers look for a consistent positive payment history when considering refinancing loans, you may still be able to secure a refinancing deal if you are behind on your mortgage payments. While you will have to pay a higher percentage rate due to your missed payments, you can catch up with your mortgage thanks to a forbearance agreement.

A forbearance agreement is ideal for a person who is behind in mortgage payments due to a temporary financial problem. If you feel that you can make the payments in the future, your refinancing loan can include an agreement to resume regular payments at a set time. Your refinancing loan provider may agree to either temporarily suspend payments by adding them to the end of the loan, or to temporarily reduce payments. As long as you make the payments on time, you won't lose your home.

When you are overwhelmed by your payments or behind on your mortgage, there is no reason to let it get worse. Reach out to a refinancing loan provider or escrow company like Liberty Escrow Inc to talk about your options today!