If you want a better mortgage than your current one, refinancing your home loan may not be a bad idea. Often, this process can allow you to replace your mortgage with one that’s better suited to your wants and needs – which is one of the main reasons why refinancing has become so popular with homeowners across the United States.
Why now might be the right time to refinance
In most cases, to determine whether or not you should refinance your home, ask yourself whether or not you’ll be saving money by replacing your current home loan. If you will, you might want to consider refinancing. A few things to keep in mind are:
Mortgage rates are low
Since the rates of home loans can often change quite a bit, refinancing now when the rates are near historical lows might not be a bad idea. Since this could help you to reduce the amount of interest you pay on your mortgage for the rest of its duration if you pick a fixed rate loan, you might want to take advantage of this now before the rates start to rise.
Your home’s more valuable
If you’re property has increased in value, you may be able to benefit from refinancing your current home loan – especially so if you’re dealing with other debts and choose cash out refinancing. With cash out, you generally get a lump sum of money from your house’s equity – and this cash could be put towards other expenses, like consolidating debts or home improvements.
You have a good credit score
If your credit has improved since you took out your mortgage, you may be able to save quite a bit of cash by replacing your current loan. Generally, the higher your credit is, the lower your interest rates will be – as well as the fact that you’ll probably have a higher chance of having your application approved.
Is refinancing the right choice for you?
While there are often numerous advantages that can come with refinancing your mortgage, replacing your current home loan may not be the ideal choice. But how can you tell if you should refinance or not?
Consider the costs associated with refinancing
There are often quite a few costs that can come with refinancing a home andin general, these can add up to quite a considerable amount. Two that you’re likely to need to pay are an appraisal and application fee – which together, could end up costing you anywhere between $500 and $1000. There are often a number of other fees aside from these two as well, so make sure to do your research and calculate just how much you’ll be looking to pay,
What’s your break-even point?
Almost every refinance will have a break-even point, which is where the costs that can come with refinancing a home are equal to the amount you’ll be saving. Generally, you’ll need to divide your home loan’s closing fees by the monthly savings of your new mortgage. In some cases, you may find that it’s best to stick with your current loan.
Use a mortgage refinance calculator
In general, mortgage refinance calculators are amazing tools for those who want to make sure that they’re doing the right thing by replacing their current home loan. Often, they’ll be able to provide you with the information you need to see whether a new home loan would have better rates than the ones you currently have.
Refinancing is often best done sooner rather than later
In most cases, refinancing is generally better when done earlier on in your mortgage, for the fact that during the start of your loan, you’re likely to be paying more towards your interest rates. So, if you’re 20 years in, consider if it’s really worth it to refinance.