When Should I Refinance My Mortgage?
Borrowers ask often if it is time to “refinance my mortgage.” There are a few factors to consider before answering this question. First of all, there needs to be a benefit to refinancing. What are some benefits to consider:
Will the rate be lower and save me money?
Is there an opportunity to shave years off of my mortgage?
Should I pay off credit card debt with my mortgage?
Does it cost money to refinance my mortgage?
Lower Rates and Savings
When you refinance a mortgage, rate is very important. The goal is always to get the lowest rate possible. Right now, mortgage rates are still very low. By lowering your rate by half a point can mean great monthly savings as well as a large amount of savings over the life of the loan. But it really comes down to your loan size. If a borrower has a jumbo mortgage loan, then saving a quarter of a point can make a huge difference.
Lowering Years on Your Home Loan
By lowering years on a mortgage, borrowers will save years of interest payments. But, this can also mean that your monthly mortgage payment will be higher. A 30 year mortgage’s monthly payments will usually be lower than that of a 15 year monthly mortgage payment. The real benefit is that borrower will always save more money over the life of the loan if they do less years. By refinancing from a 30 year loan to a 20 year loan, borrowers can sometimes save tens of thousands of dollars.
Debt Consolidation Mortgage
When refinancing with this type of mortgage it really comes down to overall monthly savings. If a borrower has high interest rate/high balance credit cards, then consolidating those into a mortgage can allow for great monthly savings. But, cash out/debt consolidation mortgage rates are usually higher than a simple rate/term mortgage. So even though you will be saving monthly, you will end up paying more over the life of the loan. Most credit card payments can be paid off over a few years. But when you roll them in to a mortgage, you will end up paying that interest on them for the life of the mortgage. This needs to be weighed out before doing this type of loan. If the goal is lowering total monthly expenses then this can be a great option.
What Does it Cost to Refinance My Mortgage?
There are usually some costs associated with doing a refinance. In many cases you will need to pay for an appraisal. Although, there are some programs that offer appraisal reimbursement at closing or appraisal waivers. And like all closings, there will be legal fees (Title, Title Search, etc.) associated with doing the loan. Most of the time, the benefit of the lower rate and lower monthly payment outweigh the costs.
At Northeast Financial we offer many different refinance options. Every situation is unique. We will work with you every step of the way to get your loan closed and are more than happy to come out in person and meet with you. The pre-approval process is very easy. Feel free to call me today to discuss your options.
NMLS# 1328596/Company NMLS# 117273