When you refinance a mortgage, you are converting the mortgage you already have into a new loan. The new loan usually has more favorable terms, such as a lower interest rate, that make refinancing worthwhile. Refinancing can have several important benefits, most of which add up to money saved over the life of the loan.
Refinancing helps you save money
Most people who refinance do so because the new mortgage will save money, usually because refinancing will allow them to lock in a lower interest rate than the one they currently have. Refinancing can help you save a significant amount of money over the life of the loan, even if the interest rate reduction is small. If you have a mortgage of several hundred thousand dollars, even a small interest rate reduction can save you thousands of dollars in interest. In fact, reducing your interest rate by just one point could save you around $5,000 on a fifteen year mortgage.
Refinancing can save you money in other ways, too, even if you are not able to lock in a lower interest rate. If your current mortgage is sub-prime because your credit rating was poor when you took out the loan, for example, refinancing could save a considerable amount of money if you’ve built up a better credit rating.
Refinancing can reduce the term of your mortgage
The potential to save a significant amount of money is the most obvious advantage of refinancing, but there is another important benefit that is often overlooked. This is the ability to refinance to a mortgage with reduced terms. For example, if you are able to refinance from a 30 year to a 20 or even 15 year mortgage, you’ll own your home outright in much less time.
Don’t forget, however, that reducing the terms of your mortgage mean your monthly payments increase. If you’re refinancing for this reason, it is important that you know your finances will remain secure enough that you can continue to meet the higher monthly repayments. The good news is refinancing for this reason is actually another way you can save money on your mortgage. Even though your monthly repayments are higher, reducing the term means you’ll pay significantly less money in interest over the life of the loan.
Refinancing lets you switch mortgage types
One of the main reasons many people refinance is to switch to a different mortgage type, for example from an adjustable rate mortgage to a fixed rate mortgage. Taking out an adjustable rate mortgage is an attractive option, especially for first time home buyers, since securing a low interest rate means lower repayments. However, many homeowners later feel that they would prefer the security of a fixed rate mortgage. Refinancing means that it’s possible to switch from an adjustable to a fixed interest rate, or vice versa, to ensure you have the mortgage that most benefits you. When is a good time to switch? It depends on many things, including your current financial situation, the state of the economy, and how long you plan to live in the home.
Refinancing can free up equity in your home
As you make mortgage payments over the months and years of the loan, you build up equity in your home. Every payment you make means you own a little bit more of the equity, and sometimes, it can be financially beneficial to tap into that equity. If you want to make improvements to increase the value of your home, fund college for your kids, or consolidate debts, for example, equity release can provide the necessary cash.
If you can get a lower interest rate when you are accessing the equity, so much the better – this will help compensate for the fact that removing some of the equity extends the life of the loan.
Time to Refinance?
Most homeowners will refinance a mortgage at least once, and statistics say that the average homeowner refinances their home every four years. That might seem a little high, but given that refinancing has so many benefits, it’s not difficult to see why refinancing is a popular option.
So when is refinancing a good idea? Look to the above list to determine when is the right time to refinance. If you can benefit by lowering your interest rate, reducing the terms of your mortgage, or switching to a more favorable mortgage type, or if you need to access some of the equity you’ve built up in your home, refinancing could be a good option.
These are not the only points to consider, of course, but they are a good starting point to think about if you are wondering whether refinancing will work for you.
About the Author
Rachel Jackson is a freelance writer who writes about financial products pertaining to the mortgage industry such as the lowest mortgage rates.
Friday, August 21, 2009
Thursday, August 20, 2009
When is Price Not the Most Important Factor When Selling Your Business?
When the Full Content of the Deal in its Entirety is Fully Explored and Strongly Considered
Price, Financing terms and conditions, Taxes, Debts, Real Estate, Sellers goals, and the qualifications/resumes of all parties involved are all factors that should be fully considered in a well thought out deal.
"If I could get $X for my business I would sell it Today."
"I need to get $X to sell my business"
"I know my Business is worth $X"
The above are comment statement s and feelings business owners share in the consideration of the sale of their business. But no business operates within a vacuum and many factors affect the business outside of the business including the rest of the industry, and local, regional and worldwide business climates. What sort of a return should one get on a business purchase is somewhat relative to what one can achieve in other investments. If one can expect a double digit return on a conservative investment, this may drive up what one may expect from a riskier investment in a business. But as investment returns on fairly conservative investments go down, interest in business acquisition may go up, and expected/projected returns reduced.
The Price of your business is not determined in a vacuum as well. The terms of the sale, the other party or parties involved with the sale, financing and terms, and the timing of the sale are a few of the important factors(outside of price) that can greatly affect the success of a sale.-
Seller financing in the sale of a business is predominant in today's economy. It is easy to think that getting a "big pile of cash for my entire business at closing"- is always best. "Cash is king" - This is a statement that is true very often, but not necessarily during the sale of your business. Offering Seller financing greatly increases the pool of potential qualified buyers. Tax advantages can surface from a well financed deal. If the Seller strongly believes in the likelihood of the Buyers success, and if the Seller does a good job of procuring adequate security, assurances, defaults, and guarantees, the Seller may greatly mitigate his/hers debt risk exposure. Additional Interest Income may also be realized as the result of a well thought out Seller financed business sale.
For example if someone sold a business 1 year ago for 100% cash received at closing, paid taxes on the gain and proceeded to protect those proceeds by investing in a conservative S&P Fund- How much money would that Seller have today? They may be disappointed and searching for a new source of earnings. I understand hindsight is 20/20, but generally a well positioned deal that is thought out with all the components of the deal fully considered greatly increases the likelihood of a successful transaction.
It can make sense to sell for a lower asking price because the terms and conditions of the seller note ultimately bring in more dollars to the Seller over the term of the note. It can make sense to sell to one individual for a lower asking price because of that person likelihood of succeeding and thus fulfilling the terms of the note. It can make sense to sell at a lower Sell price because the terms and conditions on the Seller are less restrictive and potentially have less risk or unknowns involved. It can make sense to sell for a lower Selling price because the lease terms on the property associated with the business are at mover favorable terms.
When you are selling your business you are selling a " package", with many elements involved with that package. The Sale of a business involves a package of closing documents and details. Price is one significant part of that package, but the many other elements included in the purchase offer greatly affect the success of this most important package.
About the Author
Sell a Business Florida – Business Broker of International Business Brokerage & Realty Inc. based in Southwest Florida. Florida business brokers for selling your business or finding a great business opportunity for individuals looking to buy or sell a Florida business.
Price, Financing terms and conditions, Taxes, Debts, Real Estate, Sellers goals, and the qualifications/resumes of all parties involved are all factors that should be fully considered in a well thought out deal.
"If I could get $X for my business I would sell it Today."
"I need to get $X to sell my business"
"I know my Business is worth $X"
The above are comment statement s and feelings business owners share in the consideration of the sale of their business. But no business operates within a vacuum and many factors affect the business outside of the business including the rest of the industry, and local, regional and worldwide business climates. What sort of a return should one get on a business purchase is somewhat relative to what one can achieve in other investments. If one can expect a double digit return on a conservative investment, this may drive up what one may expect from a riskier investment in a business. But as investment returns on fairly conservative investments go down, interest in business acquisition may go up, and expected/projected returns reduced.
The Price of your business is not determined in a vacuum as well. The terms of the sale, the other party or parties involved with the sale, financing and terms, and the timing of the sale are a few of the important factors(outside of price) that can greatly affect the success of a sale.-
Seller financing in the sale of a business is predominant in today's economy. It is easy to think that getting a "big pile of cash for my entire business at closing"- is always best. "Cash is king" - This is a statement that is true very often, but not necessarily during the sale of your business. Offering Seller financing greatly increases the pool of potential qualified buyers. Tax advantages can surface from a well financed deal. If the Seller strongly believes in the likelihood of the Buyers success, and if the Seller does a good job of procuring adequate security, assurances, defaults, and guarantees, the Seller may greatly mitigate his/hers debt risk exposure. Additional Interest Income may also be realized as the result of a well thought out Seller financed business sale.
For example if someone sold a business 1 year ago for 100% cash received at closing, paid taxes on the gain and proceeded to protect those proceeds by investing in a conservative S&P Fund- How much money would that Seller have today? They may be disappointed and searching for a new source of earnings. I understand hindsight is 20/20, but generally a well positioned deal that is thought out with all the components of the deal fully considered greatly increases the likelihood of a successful transaction.
It can make sense to sell for a lower asking price because the terms and conditions of the seller note ultimately bring in more dollars to the Seller over the term of the note. It can make sense to sell to one individual for a lower asking price because of that person likelihood of succeeding and thus fulfilling the terms of the note. It can make sense to sell at a lower Sell price because the terms and conditions on the Seller are less restrictive and potentially have less risk or unknowns involved. It can make sense to sell for a lower Selling price because the lease terms on the property associated with the business are at mover favorable terms.
When you are selling your business you are selling a " package", with many elements involved with that package. The Sale of a business involves a package of closing documents and details. Price is one significant part of that package, but the many other elements included in the purchase offer greatly affect the success of this most important package.
About the Author
Sell a Business Florida – Business Broker of International Business Brokerage & Realty Inc. based in Southwest Florida. Florida business brokers for selling your business or finding a great business opportunity for individuals looking to buy or sell a Florida business.
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