When Should I Refinance My Mortgage?
It can be tricky when it comes to mortgage refinance. Although low rates make it tempting it’s not always the best or right decision. An individual should really think about why they’re wanting to refinance their mortgage first. Refinancing a mortgage makes sense in some cases but there are those cases where sticking with your current mortgage makes better sense.
You should first figure out why you want to refinance your mortgage, what your goal is. Is it for debt consolidation, to reduce interest expense by getting a lower rate, these types of things. There are some advantages to mortgage refinancing for these reasons, but it doesn’t really pay off the debt it’s just restructuring it. Some homeowners consider mortgage refinance to get into or out of an ARM (Adjustable Rate Mortgages) mortgage rate.
Once you’ve decided on the reasoning behind wanting to refinance your mortgage, you should then see if the timing and circumstances are right for your reasoning. You can determine if refinancing to stretch out your mortgage term really will save you money, you can do some simple calculating own, or you can try mortgage calc. All you have to do is compare the interest savings to see if it accomplishes your financial goal. Calculate the new loan if it has the same term as the original one, and the new loan’s length.
If affordability of your mortgage payment is your reasoning, you should understand that both, a lower interest rate or choosing a longer term, will lower monthly payments, they most likely won’t reduce your interest expense. Although some homeowners who have ARMs, those not planning on having a long term loan and the new rate isn’t threatening would be okay to remain in their present loan.
Before you refinance, you should know where you stand in your present mortgage. You should include the loan term, the interest rate, and factors like your credit score and whether there’s a prepayment penalty. If after number crunching, you may find out that refinancing may not be your best option at this time. But if everything looks good for affordability, savings, or both, it’s probably a good time to talk with a professional.