When Should I refinance My Mortgage: Here Is How You Decide
There is no denying the fact that mortgage rates are around record lows. Therefore, if you are wondering “when should I refinance my mortgage”, then you have to understand that the decision is not a simple slam dunk. There is so much that should be considered before deciding if mortgage refinancing is the right thing to do. Henceforth, now the question is how do you get to determine whether or not the procedure is apt? If you are new to this procedure or not, we have got you covered in this article. Continue reading it further, and understand everything you should be knowing about the process of refinancing.
What to consider before mortgage refinancing?
- For how long do you plan to stay inside the home? You will all agree to the fact that refinancing a mortgage costs money. So if you are someone who is planning to move out of the property in the next three years or so, understand that you won’t be saving more. This is because you won’t be staying inside the property enough to cover all the costs that come along with a new loan option. Henceforth, consider this factor and then determine if mortgage refinancing makes sense to you. Until and unless you are getting to enjoy the perks, there is no use of opting for the procedure.
- Where is your mortgage standing at present? Apart from your existing rate of interest, it is very important to take into account the payment amount, principal balance, and the time left on your current loan. By any chance, if your principal balance is not up to the mark, there are chances that you won’t acquire a better rate of interest during mortgage refinancing. This is because most of the payments you will make will be going towards the principal amount and not the interest rate. So in order to make a decision, make sure to keep an eye on your mortgage statement that will explain the payment you have made every single month. Because your principal is more than expected, all the higher rate of interest is made in the early years itself. Every monthly payment is half principal and half-rate of interest. Nonetheless, if your rate of interest is higher than what you have acquired through refinancing, then there are chances that the low rate will save you some bucks.
- Do you have the credit history and time to opt for mortgage refinancing? It is an undeniable fact that the closing costs are an imperative part of the mortgage procedure, and cannot be taken for granted. Basically, they are due the time when you decide and close a loan option. The fees consist of everything from appraisal, title insurance, application fee, and other charges. The average cost of mortgage refinancing is somewhere around $5,000, however, the closing fees, and loan type may differ from one state to another.
With that being said, we hope you will be now able to determine if mortgage refinancing is the right procedure for you. Also, make sure to use a home refinance calculator before getting started with the process. It is imperative that you have an estimate of how much you might end up spending after refinancing.