Deciding When It’s Time to Refinance Your Mortgage
refinance your mortgage
Mortgage refinancing is a big decision with many variables. The most important variable to consider when making this decision is your financial situation.
It’s not always the best idea to refinance, but it can be beneficial under the right circumstances.
To help you decide whether or not now is time for you to refinance your mortgage, here are five things that should factor into your decision.
How Much Equity Do You Have in Your Home?
One of the main benefits of refinancing is that you can borrow against your home’s equity.
If you don’t have much equity in your home, there may not be many benefits to refinancing.
If you do have equity in your home, borrowing against it can provide you with a considerable amount of money that you can use for any number of expenses, such as college tuition or a new car.
What Are Your Current Interest Rates?
Current interest rates are an important factor to consider when refinancing.
The bank will give you a new mortgage with different terms than your current one when you refinance.
For example, let’s say you have a 30-year fixed-rate mortgage at five percent but can get a 15-year fixed rate of four percent right now.
You would save a lot of money over the life of your loan by refinancing into the 15-year mortgage.
Will You Stay in Your House for More Than 20 Years?
If you’re not sure whether you’ll stay in your home for more than 20 years, it may not be worth refinancing.
Should you decide to seek a mortgage refinance, you’ll have to pay the closing costs and fees.
If you don’t plan on being in your home long enough to recoup those costs, it’s probably not a wise decision.
Do You Have Any Other Debt Besides Your Mortgage?
If you have a lot of other debt, it’s important to consider how that will impact your ability to repay your mortgage.
Whether or not you’ll qualify for the new loan will be based on your income and credit score.
If you don’t think these numbers will guarantee you anything, it may be best to either consult a professional, focus on improving your score first, or rethink the idea of refinancing entirely.
Can You Afford To Pay More?
If you refinance, your monthly payments will go down, but you’ll be paying them for much longer than originally planned.
If you can’t afford to pay what you do now this may be your only option, but if you can afford to keep paying at your current rate, do you want to be paying for even longer?
This is an important question to consider when trying to reason whether or not you should refinance.
Refinancing your mortgage can be a great way to save money or get cash out for other expenses, but it’s not always the right decision.
Before you refinance, make sure to consider all of the factors involved to decide if it’s the best move for you.
Category: Mortgage
