Refinance Home Loan And Adjustable Rate Mortgage What s In It For You
Below is a MRR and PLR article in category Finance -> subcategory Wealth Building.
Refinance Home Loan and Adjustable Rate Mortgage: What's in It for You?
Summary:
Refinancing your home loan involves taking out a new loan using your property as collateral. If you're considering relocating soon, perhaps because a child is going to college, what should you consider?Choosing an Adjustable Rate Mortgage
If you anticipate moving in a few years, opting for an Adjustable Rate Mortgage (ARM) when refinancing can be a wise choice. During your last few years in the home, you'll enjoy lower interest rates before they potentially increase.
Advantages of an ARM:
1. Low Initial Interest Rates: Enjoy reduced rates for the first few years.
2. Future Planning: Gives you time to plan your next move.
3. Increased Cash Flow: Lower monthly payments free up funds.
4. Favorable Rate Adjustments: If rates drop, refinancing may not be necessary; lenders might adjust your rates.
However, there’s a key question: Can you afford the loan if rates rise? If yes, an ARM might be the right choice.
Important Considerations
The interest rate for an ARM changes over time. Initially, it's set below the market standard, similar to a fixed-rate loan. After a few years?"typically three to seven?"rates may exceed those of fixed-rate mortgages. This makes ARMs attractive for those planning short-term stays.
When interest rates increase, you can consider selling your home. Work with your lender, and assess your mortgage payoff.
Calculating Sale Proceeds
When selling, estimate your expenses. Deduct the mortgage payoff from your home's market value, and subtract selling costs to determine your proceeds.
Typical Selling Expenses:
1. Real Estate Commission
2. Advertising Costs: If selling privately.
3. Attorney Fees: Closing costs for independent sales.
4. Excise Taxes
5. HOA Fees, Property Taxes, and Other Charges
6. Inspections and Surveys
Once everything is settled, the amount received at closing should help fund your next home. If it falls short, consider securing pre-approval for another loan beforehand. Having a ready property to buy will aid in calculating the needed refinance loan amount.
By understanding these elements, you can make informed decisions about refinancing with an ARM, ensuring you're prepared for future plans and potential relocations.
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