Refinancing your mortgage can be a great way to save money and access funds without selling your home. It is important to watch out for changes in interest rates and to refinance at the right time. Refinancing can lower interest rates, leading to more affordable monthly payments, and it can also allow you to leverage your capital. It is possible to save thousands of dollars over the term of your loan if you achieve a lower interest rate, and a lower interest rate also means a lower monthly mortgage payment.
Refinancing could also help you access your home equity or get rid of a loan backed by the Federal Housing Administration (FHA) along with your monthly mortgage insurance premiums. When considering refinancing, it is important to take into account closing costs, which usually amount to between 2 and 5 percent of the principal amount of the loan. It is also important to note that refinancing a loan backed by the FHA or the Department of Veterans Affairs (VA) can take up to a week longer than conventional refinancing. If you refinance with cash out, you may be charged a higher interest rate on the new mortgage than on a rate-and-term refinance, where you don't withdraw money.
The amount you can save by refinancing depends on factors such as closing costs, but it is possible to save money over time if you refinance at the right time. This is especially true when an interest rate adjustment period is approaching and you can get a lower fixed rate by refinancing your current loan. It is also possible to borrow more money with a refinance with cash out. When looking for refinancing options, ask each lender about their average closing times and the estimated closing costs they would have to pay.
You won't begin to reap the benefits of refinancing until you reach the break-even point, where the amount you save exceeds the amount you spent on initial costs. Get a free quote or discuss the benefits of refinancing your current mortgage with an Axos mortgage specialist. There are several lenders that offer refinancing options with no closing cost, which allow you to include closing costs in your loan amount. Many homeowners opt for direct rate-and-term refinancing that lowers their interest rate and provides them with a comfortable repayment term. Americans are applying for refinance loans at a 38% higher rate than last year due to Federal Reserve drastically lowering interest rates when the coronavirus pandemic hit and loans becoming more affordable.
If this frees up money in your monthly budget or lowers the overall cost of the loan, refinancing is worth both the work and the money.