Refinancing can be a tricky business. Even though you’ve already been through the mortgage process, refinancing can be intimidating. This is especially true if you are uneducated about your options and the refinancing process to name just a few things. The biggest question you may be asking is: Is mortgage refinancing worth it?
Refinancing costs money, and you could very well choose the wrong rate or term. This mistake could cost thousands of dollars in lost interest and closing costs. The truth is that refinancing takes more planning than searching for the loan to buy your home. With refinancing, you are focusing on one thing and one thing: your loan.
When deciding if refinancing is worth it for you and your particular situation, consider the following:
You should figure out your break-even point, which is when refinance pays for the closing costs. To do this, take the closing costs and divide them by the monthly savings from the new loan. The resulting number is the number of months before you will break even. If you shorten or lengthen the term of your loan with refinancing, you could change the break-even point. Online mortgage calculators can help you determine what the break-even point is on a refinance for different interest rates and term lengths.
Benefits of refinancing
Lower monthly payment- You can redirect more of your money to other expenses and save money every month on your mortgage.
More equity- You will build more equity and you’ll do it faster. This gives you added security in a questionable real estate market.
Different loan types- If you have an adjustable rate mortgage or other type of unconventional loan, you can find a mortgage that’s better suited to your needs.
More cash- It’s possible that you refinance your mortgage for more than what you owe. Then, you get cash for major expenses such as debt consolidation or home improvements.
Remove private mortgage insurance- Removing PMI from your loan can save you a lot, because if your loan balance is less than 80% of your home’s value, private mortgage insurance is usually not required.
Refinancing can be a great decision, but it really depends on your particular situation. Before or after you’ve refinanced, count on the Home Loan Advisor to analyze your property, current market conditions, local market comps, and other variables in our proprietary algorithm as well as match you with potential lenders! To assist you in the refinancing process, you can get a free home value report from Neighborhood IQ and find out what your home is really worth.