Florida Refinance Do's and Don'ts | Mortgage

by MonikaB.Grashoff

With the run on low interest rates we've had in recent years, millions of homeowners have taken advantage of this and refinanced their mortgages. That can be to your great advantage, of course, but there are also some drawbacks to doing that. Let's take a look at this in more depth, so that you know the answer to the question, "Should I Refinance My Florida Home?" or in any location for that matter.

When Is It A Good Idea To Refinance?

When You Qualify For Interest Rates A Few Points Lower Than Your Present Mortgage: It's a good idea to consider a Florida refinance, if your present mortgage is several points higher than current interest rates, because you can save a considerable amount on your monthly housing expense. If it has been awhile since you bought your home, chances are that interest rates have dropped a few points and you should consider a Florida refinance. Consider "rolling the difference" of your monthly payment to pay down your mortgage principal and you can cut the term of your mortgage from 30 years to 15 years in a short amount of time.

When You Can Get A Fixed-Rate Mortgage Instead Of An Adjustable-Rate Mortgage: If you have an adjustable rate mortgage, you may have negative amortization that is making your principle balance go up and it is possible you may be entering the period where your interest rate is going up. A Florida refinance can allow you to get a fixed monthly payment on a lower interest, fixed-rate mortgage. A fixed-rate mortgage is better for those that plan to stay in their home for five years or longer because you're guaranteed lower interest for the life of your loan, which can save substantial amount of money over the term of the mortgage.

When Is It Not Good To Refinance?

Your House Is Almost Paid For: No matter how good interest rates are, if your house is almost paid off, it is not a good idea to refinance your home. By doing a Florida refinance you not only lose the equity that you have built in your home, you also have to start all over again. The reason for that is that every year you pay on your home, more of the payment goes towards your principal and less to interest. Therefore, if your home is almost paid off, then keep your payments current and do not consider a Florida refinance.

You Just Want Some "Extra Money": Be careful with trying to use refinancing as a way to get "free money" in this way, because you could end up in a quandary. For one thing, it's going to cost you something to refinance, usually a couple of thousand dollars in closing costs at least. And for another thing, as stated above, you are going to be "starting over" with your mortgage payments in that you're taking out a brand-new mortgage and paying off the old one at the same time, so that you're going to be making most of your payments toward interest, not principle. Again, this isn't necessarily a bad thing if it's going to get you a much better interest rate and save you a lot of money so that you can shorten your mortgage anyway, but it's not something to be used frivolously just to have some extra money.

Your Credit Standing Is Worse Now Than It Was When You Bought The House: Finally, if your credit standing is worse now than it was when you bought the house, stay with what you've got. Any refinancing you try to do is only going to hurt you in the long run, because you are a poorer risk now than you were previously. You'll likely pay more for a refinancing, it's not worth the hassle, and you may not get a favorable interest-rate anyway. So, stay with what you've got if you're in this situation.

DISCLAIMER: This article is provided as information only and is not to be taken as financial advice.

Monika B. Grashoff has extensive knowledge in mortgage financing. For more information, go to http://www.Fl-Refinance.biz to find out more about florida refi and more.