Refinancing has been a popular subject for the past two years with the historically low. If you own your own home, this might be a route you want to take. Refinancing is basically where you replace your current mortgage with a new mortgage that has a better rate or terms. It can benefit a homeowner who has owned a home for as little as five months all the way to twenty five years.
Most homeowners want to refinance due to saving money, paying off your loan quicker and pulling cash out. When you want to refinance to save money, you should start by watching the interest rate. Even if the rate goes down a quarter a point from your existing rate, this could reduce your monthly payments by thousands over the lifespan of your loan. Before jumping into the process, check with your mortgage lender to make sure this is the right move for you and your situation.
If you want to pay off your loan quicker, then refinancing might be a good idea. If you were originally set up for a 30-year loan but would like to pay your home off in 15 years, then refinancing to a 15-year loan would be best. By refinancing to a shorter term, you could pay off the loan quicker, decreasing the amount of interest you’re charged over time.
If you need cash, refinancing is a good way to benefit from the equity you have in your home. For example, if you owe $180,000 on your existing mortgage on a $300,000 home, and you then refinance with a $220,000 mortgage. This will leave you with $40,000 from the equity you have from your first mortgage. This is money you will have in hand!
When you are considering refinancing, you will need to look over your personal and financial situations and make sure it is the right time for you to refinance. In order to make sure your ducks in a row contact your bank and mortgage company to meet with them to go over your accounts. When you speak with your lender, ask them about which is the best interest rate environment and best products for your needs.
While you might save money refinancing, the process still costs money. There are costs associated with the transaction which can be paid out of pocket or wrapped into your new mortgage. An example is if you have to pay $2,000 in closing costs but will save $200 on your monthly payments, you will recoup the closing costs in 10 months.
If you are seriously thinking about refinancing, now is the time with mortgage interest rates still low. Contact your current lender and shop around for the right rates and products that will suite your needs.