When It's A Good Time To Refinance
Have you been getting offers in the mail about refinancing your home? If so, you may be wondering if it is the right time to apply and use your home as leverage for some additional cash or take advantage of a great offer. However, refinancing isn't always best for everyone. Here are some reasons to refinance your home.
Lower Your Monthly Payment
Did you buy your home at a time where interest was high? This may have resulted in a higher than anticipated monthly mortgage payment. If you find it to be a bit too high to pay each month, you may be looking for ways that you can lower how much you owe on a monthly basis. Refinancing is one way to do it if the interest rate has significantly dropped since you initially secured your loan.
Once thing to keep in mind is that while your monthly payments may be lower as a result of refinancing, you may end up owing a lot more money on your mortgage as a whole. Your mortgage amortization schedule will reset, meaning that those initial years of the new mortgage will have monthly payments that are made up of mostly interest than principal payments.
If your goal is to simply lower your monthly payment to help avoid missing payments, this can be a valid reason to refinance.
Shorten The Length Of The Loan
Did you initially get a 30 year loan when you were just starting off your career, and now have a much better paying job and can afford a higher mortgage payment? If so, you may feel like you want to pay off your mortgage sooner rather than later and become debt free.
One way you can do this is by refinancing your 30 year mortgage into a 15 year mortgage. When combined with a lower interest rate, it is actually possible to save money over the remainder of the loan due to paying less interest over a shorter period of time.
Keep in mind that your monthly payment will be much higher as a result, so only do this if you feel comfortable with the higher payments for the remainder of the loan's duration. You don't want to find yourself in a situation where you lose your job and can no longer afford those high mortgage payments each month.
For more advice about when it's good to refinance, speak to a loan officer at a local home refinance service.
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