- What is mortgage refinancing?
- When should you do it?
If you feel like monthly payments are hurting your finances or that interest rates are hard to keep up with, you might want to consider refinancing your mortgage. Here we take a look into how can you do this:
What is mortgage refinancing?
Mortgage refinancing is when you find a better deal to pay your house replacing your current loan. This new loan comes with benefits such as lower interest rates and monthly payments. Refinancing could also lead to paying off your house earlier, which will save you a lot in interest rates.
When should you do it?
Although refinancing might seem like a good idea, you should evaluate your situation as to whether this is a wise decision or not. Consider doing so if looking for:
- Shorter-term loans – When looking into refinancing, shorter-term loans might help you save a lot of money in interest rates. But be aware of the type of rates (fixed or variable) when jumping from one loan to another.
- Lower interest rates – If interest rates are high for you, consider moving into a lower interest loan. But how much lower? Aim for around 1% or 2% to consider this as a good move.
- Cash-out – Consider this a new loan that will give you a higher value on your property. This will allow you to take an extra bit of cash for any pending projects or remodelings on your mind.
IN A NUTSHELL
Refinancing could be an excellent option when looking to lower your mortgage’s monthly payments or to seek a better arrangement and interest rates. Given that refinancing should cost around 3% to 6% of your total loan, always do the math first for any changes you might want to do.
You could evaluate this decision by making a payment plan, which should give you a better idea of the best options for you to choose from wisely.