Refinancing is not a decision to take lightly. If you are asking yourself if you should refinance, the answer is not as simple as a “yes” or a “no.” You should refinance depending on several factors, and before you start the process, you need to know if refinancing is right for your particular situation.
It’s true that refinancing may allow homeowners to pay off credit card debt or student loans, complete home improvements, or pay medical bills. You may have a simple goal of lowering your monthly mortgage payment. Whatever your reasons, you need to consider the costs that go along with refinancing as well. Will it be worth it? Only you can decide.
What are the benefits of refinancing?
Under the right conditions, refinancing your home can certainly benefit you depending on your particular financial goals. Not only can you get a lower interest rate, you can switch from a 30-year mortgage to a 15-year mortgage. You may also be able to lower your monthly payment as well as build equity in your home faster. You can possibly get a fixed-rate loan and lock the rate for many years. Also, you may be able to get cash equity to pay off other debts.
How to determine if you should refinance:
You want to pay off a get a lower interest rate and a shorter mortgage. You might also wish to pay off high-interest loans or medical bills. Don’t refinance simply because you want a fancy vacation or a new car, as these are unacceptable reasons for refinancing.
You’re staying put in your home for a while. If you are considering a move within the next five years or so, refinancing is more than likely not a good idea. It is really only feasible if you plan on staying put for a long time.
You want to change your adjustable-rate mortgage to a fixed-rate. When your ARM rate increases and is higher than a fixed-rate mortgage, it makes sense to convert in order to lower your interest rate and remove the possibility of an interest rate hike in the future.
You want to come out ahead. While this could take a few years, but you will experience savings after you break even. If you owe more than your house is worth, you probably should not consider refinancing. A refinancing calculator can assist you in crunching the numbers to see if it is a feasible option.
Thinking about refinancing? A little research can mean an easy and pleasant refinancing experience while maximizing your money. Home Loan Advisor can analyze your property, current market conditions, local market comps, and other variables in our proprietary algorithm as well as match you with potential lenders!