Do you want to take advantage of the lower interest rates currently being offered and refinance your home? If so, you should know the following 3 things before you make a decision.
You May Be Paying Less In Interest Right Now
One of the reasons that many people want to refinance their homes is because they want to save money. However, you must consider a few things about your current mortgage to determine if you actually will save money in the long run. You'll want to look at the amortization schedule of your mortgage and see how much money is left in interest over the lifetime of the loan. Then take a look at the total interest you'll pay by refinancing your home with a lower interest rate.
If you are already quite a bit into your current mortgage, you may discover that the interest that remains for your current mortgage is less than the interest when refinancing. However, if you recently purchased your home within the past few years, you may be in a situation where refinancing is beneficial.
You Can Lower Your Monthly Payment
Maybe the total interest that you pay is not as much of a concern as the monthly payment. If you're struggling to make that mortgage payment, refinancing and lowering it by a couple hundred dollars per month can make a huge difference. You may pay more in interest over time, but you'll be able to build an emergency fund and have money left over at the end of the month. This can definitely make it worth it to refinance your mortgage.
You Need To Stay In The Home For A While To Make It Worth It
Refinancing is only worth doing if you plan on staying in your home for a while. That is because there are a lot of closing costs that you have to pay to refinance, and you need to break even with those costs to save money. Thankfully, this is easy to do with some basic math.
Start by looking at how much you'll save per month by refinancing, then figure out how much your closing costs are. Divide the closing costs by the monthly savings, and that tells you how many months you need to remain in the home to break even on refinancing. Do you see yourself not selling within that window of time? Then refinancing will be a safe bet that will save you money.
Contact a local home refinancing service to learn more.
Share13 April 2021
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