Your home. It’s where you eat, relax, sleep, entertain, spend time with family and so much more. But owning a home comes with a hefty bill.
In fact, your mortgage payment is probably your highest monthly payment.
Paying your mortgage on time is both good for your credit score and can help you build equity in your home — it’s much more than just keeping a roof over your head.
What can you do to make that monthly payment a little less painful? Refinance that mortgage! If you refinance your mortgage at the right time, you can save money on interest payments, which can add up to hundreds of dollars per month back in your pocket. But is it the right time for you to refinance? Here’s what you should know:
What is Refinancing?
Refinancing a mortgage means paying off an existing mortgage and replacing it with a new one, usually at a lower interest rate or with different payment terms. For some people, it’s a great way to save money on that monthly mortgage bill or pay off your home faster.
4 Great Reasons to Refinance
There are a lot of good reasons to refinance a home! Here are some of them:
Lower your interest rate. A lower interest rate often means lower payments, and right now interest rates are staying quite low. If your credit score is good, your mortgage interest rate could be well below 4% APR for a 30-year mortgage.
Shorten your mortgage term. Switching from a 30-year mortgage to a 15-year mortgage can help you pay off your home faster and get you an even lower interest rate.
Certainty. If you have an adjustable rate mortgage, now — while interest rates are low — might be the right time to switch to a fixed-rate mortgage. A fixed rate means your mortgage payment won’t fluctuate or increase and you can more effectively budget.
Tap into home equity. If you’ve been diligently paying off your mortgage and home prices are rising in your area, there’s a good chance that you’re “equity rich.” You can tap into your home’s equity to pay bills, renovate the kitchen, get a new roof, help pay for education and more.
Is Refinancing Right for You?
Refinancing is typically a good idea if it will lower your monthly payments, shorten your loan or help you build equity faster. But, it may not be the best move for all homeowners.
Refinancing can cost money: Some financial institutions charge 3 to 6 percent of the loan’s principal balance to refinance and there may be application fees. It may also require a new appraisal of a property. You need to consider those costs.
So how do you know if refinancing is right for you? Answer these two questions first:
1. How long do you plan to live in the house?
2. How much money per month and over the life of the loan will I save by refinancing, even factoring in the costs associated with refinancing?
You can probably answer the first question easily. For answers to the second question, it’s best to talk to a mortgage professional. You can get started by attending our upcoming webinar, “Refinancing: Is it Right for You?” at 12:00 pm, Tuesday, January 21 or 10:00 am, Wednesday, January 22.
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