If you happen to be thinking of refinancing your home mortgage there are a few things you will want to take into consideration. Regardless if you follow the "2% rule" or not, there are a lot of good reasons to refinance your home loan. Here are some tips to assist you in deciding if a home mortgage refinance is right for you.
There are plenty of good reasons why a homeowner would choose to refinance their home mortgage. Most choose a refinance in hopes of getting a new, lower interest rate, lower monthly payment, to get a new mortgage lender or bank, or to cash out some of the equity in their home. These are all legitimate reasons which go against the "2% rule" of mortgage refinancing or modification.
The 2% rule of Home Mortgage Refinancing
The 2% rule of home refinance states that you should never refinance your home loan unless you will be able to get a 2% or more lower interest rate than you already have. This "rule" though is nonsense and only applies in certain situations. For example, a homeowner who wishes to get out of their ARM (Adjustable rate mortgage) and into a more stable fixed rate home loan. Generally a fixed rate mortgage comes with slightly higher interest rates than a ARM would, so in this case it would be smart to throw that 2% rule out the window.
It would make the most sense for you, as a homeowner, to evaluate your financial position and refinancing options that may be available, and which is most beneficial, for you. Refinancing a home loan costs money. There are closing costs and other associated fees whenever a new loan, regardless of the type, is taken out. Figure out the "break in" time which is when after the cost of a refinance, you will start seeing true savings from your new home loan.
Practice plenty of patience and do some basic research in order to ensure you are getting the best refinancing deal you can possibly get. The savings that can be had are incredible and can start with your next home loan payment.