Posted on: 9 November 2015
If you are struggling to pay your mortgage each month, it's time to do something about it. You could refinance your home or sell it and buy or rent something cheaper. However, which option is right for you? These questions can help you make up your mind.
Is Your Main Goal to Lower Your Monthly Mortgage Payments?
If you are looking to lower your monthly mortgage payments, and you have at least 20 percent equity in your home, a refinance could help thanks to low mortgage rates. However, if you don't have enough equity in the home, you may have to pay private mortgage insurance. In some cases, this insurance may actually significantly increase your mortgage payment. That being said, even if you don't have much equity in your home, you may still want to consider talking with a lender to see if they can make something work. If they can't make something work, however, you best bet may be to sell your home and get something less expensive.
Do You Have a Lot of Non-Mortgage Debt?
A lot of people struggle with non-mortgage debt, such as car loans, school loans and credit cards. If your debt is getting out of control and you have a lot of equity in your home, a refinance could be a good choice. You can refinance for more than you owe on your house. You can then use that extra money to reduce your debt. Make sure to talk with your lender to determine what your mortgage will be when everything is paid. Thanks to low interest rates, you should be able to reduce your monthly debt by paying off your non-mortgage debt and increasing your mortgage.
How Long Do You Want to Stay in Your Home?
Another factor you need to consider is how long you want to stay in your current home. If your current home is too small, but you are expecting to have children soon and will need more space, a refinance may be a waste of time and money. Similarly, if your kids are leaving the nest and you want a smaller house, you should probably sell. Make sure to determine how long it will take to break-even if you do refinance. For example, if it's going to take 18 months to break even, but you're going to stay in the house for at least another five years, a refinance is fine.
Many people struggle with debt, but refinancing or selling your home can help. If you aren't sure if refinancing is right for you, contact a lender to determine how much you can save.
To learn more about real estate, contact a company like Haring Realty.Share