When it comes to making a decision about refinancing your home, there are a few key factors to consider. Generally, if you can lower your interest rate by half to three-quarters of a percentage point and plan to stay in your home long enough to recover closing expenses, it's a good decision. If your main goal is to lower your monthly payment, refinancing a 30-year mortgage may be the best option. However, if you want to save on interest and reduce the term of your loan, then refinancing a 30- to 15-year mortgage may be the best option, as long as you can afford the highest monthly payments. To get an idea of what might work for you, use a mortgage refinance calculator.
Keep in mind that if you spend the capital you've earned on paying off your debt, you'll have to wait until your home value increases and you spend more years of mortgage payments before you can access that source of cash again. When you refinance a mortgage, you exchange your current mortgage loan for a new one with terms that work best for you. For example, if you refinance a mortgage with a longer loan term than your current mortgage, your rate could rise. But is refinancing worth it? Here's what you need to know. Depending on your current loan, reducing your interest rate by 1%, 0.5%, or even 0.25% could be enough to make refinancing worthwhile.
If you'd like to learn more about mortgage refinancing and how to do it, or if you're ready to refinance it now, contact the RamseyTrusted home loan specialists at Churchill Mortgage. Another reason not to refinance is if you plan to sell the house before it break-even or if the new monthly payment is more than you can comfortably afford. Refinancing can change your monthly payment and make it higher or lower, depending on the terms you choose. If your original mortgage has a term of 30 years (or more), refinancing is a good way to achieve the ultimate goal of getting a 15-year fixed-rate mortgage. A lender may offer you a lower interest rate for your refinance, lower closing costs, or both. In that case, it'll take you 40 months to break even and start saving money, so if you're planning to move in two or three years, it's not worth refinancing.
So, if you don't plan to stay in the house for more than a few years, the cost of refinancing can negate any of the potential savings. When interest rates fall and many homeowners want to refinance, lenders get down to business and refinancing can take longer. If that's the case, refinancing a 30-year loan could result in a much lower monthly payment since you now have twice as much time to pay off your home. While you can do whatever you want with the money you get from a cashback refinance, it's important to remember that your refinance is still a loan. Refinancing your home can be an excellent way to save money and build equity faster. However, it's important to weigh all of the pros and cons before making any decisions.
Use a mortgage refinance calculator and consult an attorney for help if needed. You can use the money you save with refinancing to take control of your monthly bills, save for retirement and pay off your mortgage faster.
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