If you currently have a mortgage on the home that you live in, it may be worth looking into a new loan. Refinancing mortgages could save homeowners a lot of money in the form of lower interest rates. What are some variables that you should consider when deciding whether or not its time to refinance your mortgage?
Do You Have to Pay Any Closing Costs or Lender Fees?
Lender fees or closing costs could negate any potential savings that you may see from a lower interest rate. Even if you plan on keeping the home for a long period of time, it may take several months or years before you see a net decrease in the cost of your home loan. In some cases, you may be able to have those costs waived if you are planning to stay in your home.
Do You Benefit From a Lower Interest Rate?
It is almost never a good idea to refinance a mortgage unless you can get a lower interest rate. This is because you will ultimately pay more for the right to borrow money than you were in the past. You should also make sure that your new rate is the one that you will pay for the life of the loan. If you refinance to a variable rate loan, you could see the rate go up in as little as one year.
Does Your Current Loan Have a Prepayment Penalty?
If your current loan has a prepayment penalty, it could make it impossible to refinance your loan as it is technically paying off your old loan with a new one. In the event that you have such a penalty in your current loan, see if your can renegotiate the penalty or get it removed altogether. In the event that your lender will not oblige your request, it is another cost that you will have to take into account before deciding if a new loan is in your best interest.
Will You Be Refinancing to Get Cash?
In some cases, it may be possible to cash out your equity when you refinance your house. That may make it easier to pay off other debts to get your financial house in order without having to sell your actual one. However, be sure that you aren’t pushing the final payment on the loan so far out that you are paying a mortgage during your retirement years.
Refinancing your mortgage may have a lot of benefits for you and your family. However, it is critical that you look at all the costs and possible downfalls to doing so. Fortunately, there are many resources that you can access both online or by talking to a mortgage lender to help you make that decision. Check out WFCU Credit Union if you would like to learn more information.