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    Does it Make Sense to Refinance After 50?

    Tech AdminBy Tech AdminApril 25, 2017No Comments3 Mins Read
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    Does it Make Sense to Refinance After 50?

    Of course, you are not restricted from refinancing when you’re over 50. The question lies in whether it is practical or not. For many, being near their retirement years isn’t really a good time to restart a debt anymore. Many individuals wish to be preparing for their golden years when they reach this age and don’t want to be burdened with debts. But what if interest rates drop significantly or you need the money from your equity to fund an important expense? Will the refinancebe worth it, despite the risk?

    Talking about interest

    If you are drawn to the potential savings you could earn from the current interest rates, experts advise that your resulting interest savings should amount to at least 1 percent of the mortgage for it to be a significant jump. You should also be able to save enough to cover the costs of closing.

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    Are you going to settle in the home or move in the future?

    Calculate the time it would take for you to recoup the money that you paid in closing via your mortgage payments. If you plan to stay in the house and use the property as your retirement home, then this shouldn’t be a problem. However, if you want to move in a few years and do so before the closing costs have been recouped, you will lose money on the refinance.

    Think loan term

    Of course it does not make sense to refinance when you only have five years left in your mortgage. If you are halfway through, you may refinance into a new loan with a shorter term. Remember that you are restarting the mortgage clock when you get a refinance. Factoring in your future plans into your decision-making process can help you choose whether to get a shorter or longer term for the intended refi. For seniors, opting to refinance to a shorter term is a more appealing choice as most don’t want mortgage payments to interfere with their retirement plans.

    On Income and Approval

    Refinancing just before retirement may pose roadblocks for your retirement savings. More payments on debts means lesser for your retirement fund. A good way around this is to ensure a good credit score and DTI ratiowhen you apply. This allows you better chances of getting lower mortgage rates. When you refinance during your retirement years, you may find it hard to get an approval because of less income.

    In your 50s, the decision to refinance can be conflicted by a lot of financial factors. Don’t rush into the decision if you can find an alternative. For example, if your intention is to save, you may instead opt to accelerate your payments and get rid of the mortgage soon, with savings on the monthly interest. But if you’re in one of those tight situations where money is needed for say, an emergency expense, a refi, although entailing risk, can still be a viable advantage you can explore.

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    interest interest rate loan term refinance retirement retirement fund
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