The following is a guest post by Emortgage Calculator, which provides mortgage calculator tools and comparison data for “whole of market” advisers:
With rates at record lows across the UK, America and several other regions, millions of people are either in the midst of, or considering refinancing/remortgaging existing mortgage loans. Additionally, new home purchases are looking more and more affordable – for those that can meet the newer, more rigorous requirements. Given the increasingly attractive conditions, it’s important to consider the pros, cons, and how to compare across various alternatives.
Which Term is Right for You?
There are myriad reasons to choose different terms for your mortgage; generally speaking, the shorter the term, the lower the interest rate will be. However, with rates this low even on longer duration loans, it often times doesn’t make as much sense to shrink the duration. For instance, in the US, if you can get a 30 year mortgage for 4% or a 15 year loan for 3.5%, having the flexibility of a lower payment and enjoying the present value of money may make the 30 year mortgage at the higher rate much more compelling. Conversely, if you have the funds and want to be mortgage free by say, when your kids hit college age in 6 years, maybe taking on a 5 year loan at an ultra-low rate is the best choice. Much depends on your personal situation, but make sure you’re considering all factors holistically. For instance, Emortgagecalculator.co.uk can provide you with numerous options to choose from.
Do the Transaction Fees Justify the Transaction?
Often times, for purchases, you’re either going to do the deal or your not, but with refinancing, there are specific nuances that make a refinance worth it in some cases and not so in others. For instance, if you’re already very far into the term of a mortgage, it may not make sense to refinance even at a substantially lower rate. Additionally, depending on where you live and which company you use, transactions costs can vary so you’d want to consider both the payback period (at which you recoup your closing costs) and also be sure you’re going to reside there long enough to make up for it.
How to Choose from Various Options
One of the biggest mistakes one can make in selecting a mortgage or refinance is to not conduct the proper due diligence. By using an E Mortgage Calculator, you can quickly ascertain various rates and fees to understand which top 1-2 companies you should be working with.
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I did not refinance my mortgage because the balance was too small to make enough of a difference. I will have it paid off in less tha 6 years anyway.