Making Sense of Refinancing
If you keep hearing about the “historically low refinancing rates” and are wondering whether or not refinancing your mortgage is right for you, you’re not alone. Refinancing can seem like a complicated topic, but we’re here to help you make sense of it all in a way that’s straightforward and easy to understand.
What is Refinancing?
In short, refinancing is replacing your existing mortgage with a lower-interest loan. With new terms, you can use the money from refinancing to pay off your old loan. There are lots of reasons to consider refinancing, especially if the difference between the interest rate on your old home loan and your new one are considerably different.
Why Should You Refinance?
There are several reasons you’ll want to consider refinancing. By refinancing with a lower interest rate, you’ll save money every month which you can use on other things or save. If you refinance into a loan with a shorter term, your monthly payments will go up but you’ll be able to build equity in your home faster and therefore pay off your mortgage sooner.
If you do a cash-out refinance, you can turn the equity you’ve built in your home into cash that you can tap into and spend whenever you want without worrying about tax penalties. There are a lot of options to consider as well as how you want to proceed with the refinancing. Everyone has their reasons and it’s important to understand the pros and cons fully before you decide.
Is Refinancing The Best Option for You?
It’s hard to give a definitive “yes or no” answer to “is refinancing right for me?”. You’ll need to consider your financial goals in the short term as well as the long term. Do you want to lower how much you spend on bills every month? Do you want to shorten your loan term and pay off your mortgage faster? These are both great reasons to consider refinancing.
Another point to consider is your credit score. If your credit score is exceptional (800+) or very good (740-700), you have a higher chance of refinancing with better interest rates than someone with porter credit. Keep in mind that once you factor in closing costs, it can take time to break even with your savings.
If you’re thinking of selling your home soon or moving, refinancing may not be a good idea, but if you plan to stay and you’re thinking of making improvements, cash-out refinancing can help you put that money back into your home so that should you decide to sell in the future, you can sell it for more. For example, consider how much you could add to the selling price if you add a new roof, a finished basement, or a new kitchen remodel.
There are a lot of points to think about, but that doesn’t mean that you have to do it all on your own. Our experienced, knowledgeable and friendly loan officers can help you make sense of the process as well as answer any questions you may have. We’ll take the time to understand the big picture as well as your goals in helping you decide if refinancing is right for you.
Contact our top mortgage broker today to learn more about your refinancing options and how to take the next step!