How a Refinance can put Money Back in Your Pocket
Find out how refinancing can help you save on extra payments, reduce interest charges, and lower your monthly mortgage payment.
How much can you save by refinancing your mortgage?
A mortgage refi is one of the most powerful ways to save money over time. When you apply for a new loan, it will help narrow down your options and get rid of any confusion about which lender would be best suited for what type or property size with their rates and fees. Let’s look at how much more importantly this could put some extra cash in our pocket:
A difference of even 1% can result in significant savings! For example – say I’m currently paying 2% interest on my house but am considering refinancing because there are better deals out there; if we go back into today where he was offered 1%, then every $100 borrowed means less than 97 cents saved (including origination costs). Scenarios provided by foxbusiness.com
- If you have a $250,000 30-year mortgage with an interest rate of 3.875 percent, and you refinance it into a 30-year mortgage with an interest rate of 2.875 percent, you would reduce your payment by $138 a month and save more than $20,000 in interest, not including closing costs.
- If you refinance that same mortgage into a 15-year mortgage with an interest rate of 2.375 percent, you reduce your total interest by more than $96,000, and choosing a 10-year loan would save more than $112,000 in interest
When Should You Refinance Your Mortgage
It's important to consider refinancing if you're currently required to pay private mortgage insurance (PMI). If your home has appreciated and the lender is less than 80% of its value, then they may be able eliminate this charge with some refinancing! If you’re just starting out, consider how long your mortgage terms are. If the loan is less than two years old and has an identical term as well (e.g., 10 year), then there should be no concern about having this type of refinancing done; however if it’s over ten or fifteen years since buying property outright with cash – which can take place in some rare cases where salaries don’t keep pace increase at least annually–a new loan would likely mean adding another decade to what little progress one might have made towards paying off his/her debt! There are many benefits to refinancing your mortgage. Not only can you save money on rates, but with the economy being what it is right now and no one knowing how long this low period will last-you should definitely consider getting rid of that high interest rate first Mortgage Company loan!
Does a Mortgage Refinance Make Sense?
The decision to refinance your mortgage should be made in consultation with a lender who is able to assess the best option for you. Though refinancing may seem like an attractive option, it’s only worth doing so if there are certain conditions met and not all homeowners can take advantage of these low rates; those planning on staying put or changing jobs within 2 years might want to think twice before taking out another loan! Closing costs can be a shocker, and it’s easy to forget about them until you’re already in the thick of things. There are fees for getting your credit checked as well as an appraisal so make sure these don’t cause any delays or stand between you and that new home! You might also want to invest some time into researching mortgage loans since this will help ensure that all bases are covered financially- such as interest rates which may vary depending upon what type of loan chosen (fixed vs adjustable).
Consider This Example Provided by foxbusiness.com
For example, if refinancing your $250,000 mortgage saves $138 each month, it would take 37 months to recoup the $5,000 closing costs. If you plan to stay in your home longer than that, refinancing could make sense. Keep in mind, converting your 30-year mortgage into one with a shorter term will increase your monthly payment. If your current job situation isn’t secure, refinancing a loan with a shorter term could be a mistake. And if you're self-employed or have been furloughed or laid off, you could find it harder to be approved.
Bottom Line
Whether you're refinancing your house or thinking of moving to a new home, your current mortgage rate and your level of equity are crucial in your decision-making process. Look at your mortgage documentation to find out your interest rate, and then let's connect to determine the potential equity in your home. You may be surprised by the opportunities you have.