As a homeowner, you’d probably love to lower your monthly mortgage payment. Refinancing your home loan is one way to do this, but how do you know if refinancing is the right option for you? There are many factors to consider before choosing to refinance. Here are some of the better reasons many homeowners decide to refinance.
Take advantage of lower interest rates
Many lenders claim even a 1% savings on interest rates should be reason enough to refinance. Reducing your interest rate can help you build more equity in your home sooner and decrease the size of your monthly payment, saving you lots of money.
Shorten the term of the loan
If you have a mortgage with a really high interest rate, refinancing into a shorter term mortgage can help you pay off your loan in half the time without changing your monthly payment much.
Convert between adjustable-rate and fixed-rate mortgages
Over time, adjustments can increase the rates on Adjustable Rate Mortgages (ARMs) until they top the going rate for fixed-rate mortgages. When this happens, switching to a fixed-rate mortgage is a good idea.
Other factors to consider before refinancing are any possible fees and closing costs. A typical refinance will cost anywhere between 3-6% of the loan’s principal. From now until Aug. 31, 2018, you can get up to $1,000 credit on closing costs with a first mortgage home loan from us which makes refinancing even more beneficial.
Here’s how to determine if a refinance will save you money. Ask for a good faith estimate from your lender and get your projected interest rate and loan price. Divide this price by the amount you’ll save each month with your new rate. This is the number of months it will take for you to break even on the new loan.
Another thing to consider is how long you plan to stay in your home. If you don’t plan on staying for much longer, refinancing may not be a good idea because you may not be there long enough to reap the benefits.
Still need help deciding if a refinance is right for you? Talk to us! We’re here to answer any questions you may have and make the process easy.