It seems like a pain to go through the mortgage process AGAIN just a few years after purchasing your home. Loan applications, appraisals, closings…why bother if your current mortgage payments already fit comfortably into your budget? Are the savings and benefits worth it? Even if you’re not considering a move, the time could be right to refinance your home.
Do you have a child in college? Are you interested in starting a business? Refinancing your home can be a strategic way to dip into your own personal piggy bank to help in many different life situations.
What is refinancing?
“Refinancing” is getting a new mortgage to replace your original one. Instead of throwing out the original mortgage, the first loan is paid off when the new loan is created. Refinancing can improve the interest rate and term of the loan.
When is refinancing a good idea?
Like many things, it’s a numbers’ game. There are two metrics to weigh as you consider when to refinance: your home’s value relative to the amount owed on your current mortgage and current interest rates. Over time, the value of your home should increase, and there could be more incentives to refinance. You can’t control the fluctuations in interest rates, but you can monitor them to find strategic opportunities. When your home’s value is up and the interest rates are down, you will get the maximum benefit from refinancing your home.
We’ve had historically low-interest rates for a long time, and it’s difficult to tell when they might start to creep back up. With the current state of the economy, we recommend making refinancing decisions based on your personal financial situation rather than holding out for a possible future rate improvement.
Why is refinancing beneficial?
Apart from just lowering your monthly mortgage payments, refinancing gives you options to utilize the equity you’ve built on your home. You can utilize the cash equity built up in your home to pay off credit card debt, a car loan, a student loan, or even start a business, buy a second home or an investment property.
Decreasing your interest rate today by even one percentage point might make a bigger difference than you think. A 1% improvement could save you more than $20,000 per $100,000 financed over the term of a 30-year mortgage.
Should I refinance?
MortgageRight can help explore all the different possibilities that open up to you when you refinance your home. Our trained mortgage specialists can help you explore the benefits of refinancing based on your situation to determine if now is the best time for you to take action.