Are you wondering if “this” is the right time to refinance your mortgage? You are unique, and so is your financial situation. Perhaps your financial circumstances have changed since you first took out your mortgage. Possibly you have changed jobs, and now you are working with a different budget. It is also possible that the economy has changed, or there has been a change in interest rates. Or, today, you might think differently about your mortgage than you did when you first took it out. There are many “good” reasons to contemplate a refinance.
Whether or not a refinance makes sense for you depends on a variety of factors. In this article, I want to share some fundamental refinance information to help you consider your mortgage refinancing options.
Reasons That It Makes Sense to Refinance Your Mortgage
1. You’re looking for better rates.
As a home loan borrower, it makes perfect sense that you want the best possible interest rate. If you qualify for a better interest mortgage, it is logical to look into a refinance.
When you first agreed to the terms of your mortgage, your budget, goals, circumstances, and the economy might have been different. Verify the interest rate you are currently paying on your mortgage and research what rates would be available with a refinance. Lower interest rates make it cheaper to borrow. Even a slightly lower rate could have a big impact on the total loan amount.
2. Your monthly budget has changed.
Budgets change all the time. Have you switched careers where you earn more? You might be able to pay more into your mortgage each month. Have you cut down your hours at work? If this is the case, you may be looking for ways to save each month. A change in your budget is an excellent reason to consider a refinance.
3. You’re interested in using your home equity.
Maybe you’ve reached a time in your life where you want to make a new investment, start a business or pay for a college education. Cash-out refinancing is one way to gain access to cash by using your home equity. You’ve worked hard to make your loan payments over the years, and now you might be able to use some of that cash and follow your dreams.
Real-Life Examples of Individuals Who Refinanced
Many homeowners have consolidated their non-mortgage debt – like Emily and James:
Emily from Richmond:
At the time of the refinance, her home was valued at $360,000. Emily had a home equity of $194,462. Her loan balance was at $165,308. On top of that, she had a non-mortgage debt of $20,151 at around a 16% interest rate. When she chose to refinance her mortgage, she was able to eliminate all of her non-mortgage debt, which equaled $622 a month. Her new mortgage payment was increased to $106 a month. That resulted in a total savings of $516* a month in comparison to her total payments before refinancing.
James from Tampa:
James is another example of someone who chose to refinance and ended up with a total monthly savings of $513* each month. At the time of the refinance, his home was valued at $545,000, and his home equity was $219,527, with a loan balance of $400,000. In addition, he had a non-mortgage debt of $41,589 at around a 19% interest rate. When he refinanced, his new mortgage payment became $180 less a month. He also eliminated his non-mortgage debt, eliminating $766* in monthly credit card payments.
How to Proceed With Home Refinancing
If you’re inspired by the real-life examples above and feel like a home refinance is the right option, here’s some information on how to move forward.
Start by speaking with your lender about your refinance options. Read the details and terms of the refinance carefully. Ask questions to make sure you understand every little detail.
By researching and learning about mortgage refinancing, you can be one step closer to your ideal home mortgage.