Considerations for refinancing your mortgage?
Mortgage rates are at a historic low. If you’re thinking about refinancing your mortgage, you could possibly save significant amounts of money over the years. Especially in the first years of owning your home, a large percentage of your monthly mortgage payment goes toward paying interest rather than the principal.
Here are some reasons you may want to refinance:
To lower your interest rate This is one of the most common reasons. If you first obtained your mortgage when interest rates were higher, refinancing enable you to save money each month.
To obtain a different type of mortgage If you have an ARM (Adjustable Rate Mortgage), your interest rate can fluctuate. You may want to refinance so you can have a fixed-rate mortgage.
To obtain funds These funds can be used for renovations, vacations, unexpected life events or even a down payment for another property.
Considerations you may have: To make sure you will actually save money by refinancing, its important to look at the big picture to know if it’s the right fit. In some situations, refinancing might not be the good choice, it’s not because interest rates may be lower now than your current interest rate does not necessarily mean that you should refinance. Here are some important considerations to keep in mind: - Fees involved Your new loan may have a variety of fees with it, including closing costs and an appraisal. Lenders can add these fees into the mortgage so you can pay for them over time rather than upfront. You will need to weigh any fees you will have to pay against any savings. A good mortgage professional will help you with that. - When you plan to move If you don’t plan to stay in your home for long, you may not have time to recover enough savings to offset the costs of refinancing. - Why you want to refinance Refinancing purely to save money is perhaps the simplest decision. But if you want money to, for example, pay off debt, your decision can be more complicated. It may help your financial situation in the short term, but will it help in the long run?
