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09.28.2020 / Borrowing « Back to all articles
Should You Refinance Your Home?
Mortgage rates have reached record lows. With the economy now coasting into a recession, it is only natural that you might wonder if you should refinance your home. After all, the prospect of making potentially lower monthly payments is attractive. However, is this option right for you? That depends on a few factors.
The Benefits of Refinancing
Homeowners generally pursue specific benefits when the idea of refinancing becomes tempting. Here are the most common.
Access Equity
If you purchased your home several years ago, it may have appreciated in value above what you currently owe. If you refinance your mortgage at a good rate, you can access that cash and use it as a savings cushion or investment capital.
Extend Your Mortgage
When you refinance your mortgage, you might have the option of restarting your 30-year mortgage time clock. This might prove favorable if you are struggling to make payments on a reduced income. However, note that you might pay more interest by the end of the loan.
Lower Interest Rate
Even a simple .5% can make a difference in your monthly payments and overall mortgage debt burden. Subsequently, you might choose to refinance to take advantage of the much lower interest rates in the market.
When Refinancing Is a Good Idea
Before refinancing your home, one of the first things you should check for is whether your mortgage carries a prepayment penalty. If it does, consider the pros and cons of that large penalty versus your savings.
The second important factor is to check the interest rate and the remaining balance. Interest rates might be low now but yours might be lower depending on when you purchased the home. Even if the interest rate is a little higher, you could see lower monthly payments based on the remaining balance.
Finally, consider your current financial situation. If you recently lost your job or do not make as much now as you did before, you might not qualify for a mortgage under favorable terms. Always ask for projections of what your payments could look like.
How To Refinance Your Home
Generally, the company refinancing your mortgage pays off the existing balance on your old home loan and then you owe the new company. You can sometimes refinance your mortgage with the same bank that holds the original loan but shopping around plays a crucial role in getting the best deal. Note that even when there is no prepayment penalty, there are costs involved in refinancing your home loan. You might incur both closing costs and legal fees. However, the equity in your home might cover this.
Knowing how and when to refinance can be a challenge sometimes. It never hurts to consult a loan provider to discuss the options available to you.
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09.28.2020 / Borrowing « Back to all articles
Should You Refinance Your Home?
Mortgage rates have reached record lows. With the economy now coasting into a recession, it is only natural that you might wonder if you should refinance your home. After all, the prospect of making potentially lower monthly payments is attractive. However, is this option right for you? That depends on a few factors.
The Benefits of Refinancing
Homeowners generally pursue specific benefits when the idea of refinancing becomes tempting. Here are the most common.
Access Equity
If you purchased your home several years ago, it may have appreciated in value above what you currently owe. If you refinance your mortgage at a good rate, you can access that cash and use it as a savings cushion or investment capital.
Extend Your Mortgage
When you refinance your mortgage, you might have the option of restarting your 30-year mortgage time clock. This might prove favorable if you are struggling to make payments on a reduced income. However, note that you might pay more interest by the end of the loan.
Lower Interest Rate
Even a simple .5% can make a difference in your monthly payments and overall mortgage debt burden. Subsequently, you might choose to refinance to take advantage of the much lower interest rates in the market.
When Refinancing Is a Good Idea
Before refinancing your home, one of the first things you should check for is whether your mortgage carries a prepayment penalty. If it does, consider the pros and cons of that large penalty versus your savings.
The second important factor is to check the interest rate and the remaining balance. Interest rates might be low now but yours might be lower depending on when you purchased the home. Even if the interest rate is a little higher, you could see lower monthly payments based on the remaining balance.
Finally, consider your current financial situation. If you recently lost your job or do not make as much now as you did before, you might not qualify for a mortgage under favorable terms. Always ask for projections of what your payments could look like.
How To Refinance Your Home
Generally, the company refinancing your mortgage pays off the existing balance on your old home loan and then you owe the new company. You can sometimes refinance your mortgage with the same bank that holds the original loan but shopping around plays a crucial role in getting the best deal. Note that even when there is no prepayment penalty, there are costs involved in refinancing your home loan. You might incur both closing costs and legal fees. However, the equity in your home might cover this.
Knowing how and when to refinance can be a challenge sometimes. It never hurts to consult a loan provider to discuss the options available to you.
