Just when it seems like you have affixed your last signature on your mortgage forms, deals for refinancing come at you left, right, and center. However, does it make sense to have your mortgage refinanced? Here are the facts that you need to know.
When You Should Consider Having Your Loan Refinanced
Keep in mind that having your loan refinanced will end your old mortgage and begin a new one. However, there are a few advantages to having your mortgage refinanced.
1 – Lower Interest Rates
There is a chance that you will be able to get lower interest rates on your refinanced mortgage. Lower interest rates mean that you can realize more savings during the life of the loan. However, for the refinance to make sense, the amount of interest that you save should go toward repaying the refinance costs.
If you qualify for it, you can reduce your mortgage term, therefore lowering the interest rates on your loan as well. For example, if you currently have a 30-year mortgage, you may opt to refinance your loan to 15 years. A 15-year mortgage will have a significantly lower interest rate.
2 – Shorter Loan Term
When you have your mortgage refinanced, it is a good idea to opt to get a shorter term. A shorter loan will accelerate equity growth for your home. However, there are a few key points to consider if you want to get a shorter loan term.
Remember that a shorter-term mortgage will require a higher amount in monthly payments despite having a lower interest rate. However, as long as you are able to make payments on time, you can repay your mortgage in a shorter period.
3 – Change From Adjustable To Fixed Rate
There are many advantages to having an adjustable-rate mortgage, but one important disadvantage is that, on some occasions, your interest rate may be variable as well. Loan refinancing options may offer you the chance to have lower interest rates than your adjustable-rate mortgage’s interest.
4 – Combining A First and Second Mortgage
Before you think about refinancing your loan, you have to consider if you already have enough equity in your home. If you took out a first and second mortgage to be able to afford your home, it might be a sensible option to refinance your mortgage and combine the first and second mortgage. This option is great for you if your second mortgage is adjustable. It will make much more sense to pay for a singular mortgage rather than two.
Getting your mortgage refinanced may be a great idea for you if you fit the requirements. However, mortgage refinancing may not be a good option in select cases.
Keep in mind that if you already have a good deal with your mortgage, and if your interest rate is already low and affordable, you may not benefit from having your mortgage refinanced. There are fees that you will have to pay when you refinance, and in some cases, these fees will not be worth getting a new loan.
The best first step is to consult your mortgage consultant. They will be in the best position to advise you about refinancing your mortgage, the options that are available to you, and if it is right for you to go ahead and refinance.
Frontline Financial consists of mortgage professionals specializing in helping Veterans buy new homes. If you are thinking about refinancing your mortgage, contact us and get better mortgage rates today!