Things to Know About Refinancing Your Mortgage

With interest rates being at historic lows, if your current mortgage is above 4% now is the time to seriously consider refinancing your mortgage loan. A mortgage refinance is when you replace your current home loan with a new one. But don’t base your decision to refinance based solely on the interest rates. It’s really important to think about how long you plan to stay in your home. The current rate environment may be a good time to look at refinancing or to consolidate all types of debt.

Although there are mortgage calculators to give you a sense of how much money you’ll save by refinancing your mortgage, your goal should be to stay in the house at a minimum an additional two and a half more years to make up for the cost of financing. Just be sure to surpass that 30-month threshold.

Refinancing from a 30-year mortgage into a 15-year mortgage is a slam-dunk for saving money. You’ll pay less interest over the course of the loan as you pay it down faster. But only if you have enough income to take upon a higher payment: you should consider it, as you ultimately pay less in the long run. It may reduce your monthly available disposable income. And even though you may be paying off your home faster, it also means that you could have less cash available for other purposes, such as investing or contributing to your child’s college tuition. This option could also make sense if you’re nearing retirement and you’re someone who doesn’t want to carry much debt.

Another option to pay off your mortgage faster is to refinance into a 30-year fixed mortgage with lower monthly costs and make extra principal payments with the money you would’ve spent each month on the 15-year loan. This way, you’re on track to pay the mortgage off earlier than 30 year but have the flexibility to not have to pay bigger payments each month if your financial circumstances change.

Homeownership and refinancing your home is a complex process. Let the experienced professionals here at MortgageDepot answer all your questions when you’re considering your refinancing your home. Contact us MortgageDepot.com.