Mortgage Refinancing: What You Need To Know
Natalie Tuchscherer
SVP | Mortgage Lender
As with any debt, finding ways to save money while staying aggressive about paying it off is important. Refinancing your mortgage can be a great way to do just that. Here’s how to tell if NOW is the best time to refinance.
Should You Be Refinancing?
Can Your Rate Be Reduced?
Depending on the amount of your current loan, a good rule of thumb would be to look at reducing your rate by at least 1%. However, there are circumstances where saving less than 1% can also make sense to proceed with a refinance. The best way to find out is by reaching out to us and talking with one of our mortgage lenders.
Are You Able To Cut Your Loan Term?
If you can potentially move your loan term down from 30 years to 20, 15 or even 10 years, this can drastically save on the amount of interest you pay over the life of the loan and allow you to retire your mortgage debt more quickly.
Example:
You currently owe $250,000 on your home. You have lived there for 2 years and your loan is at a rate of 4.50% with monthly principal and interest payments at $1266.71. If we refinance your mortgage to a 20 year term at a rate of 3.25%, you would remove 8 years from your mortgage and cut $121,000 worth of payments (96 payments).
Looking To Consolidate Debt?
If you have debt with a higher rate than the current mortgage rates, it may make sense to refinance your home in order to pay off other higher rate obligations such as credit cards or vehicles. However, you will need to have some equity in your home.
Need Some Extra Cash?
Depending on the amount of equity in your home, you may be able to take cash out for things such as: home improvement projects, college tuition or even the family vacation you’ve been planning. This may be a good opportunity to pay for these expenses at a very low rate of interest.
What To Expect When Refinancing?
You will initially get an estimate that will include a new projected monthly payment as well as the closing costs estimate. Depending on how much equity you have in your home, you may be able to roll the closing costs into the loan and not have any cash out of pocket. You may or may not need an updated appraisal.
Ready To Get Started?
Whether you’re ready to get started or just looking to ask a few more questions, we’re ready to help! Reach out to us with the form below and Natalie will be in touch shortly.