With the current low interest rates, there hasn’t been a time in recent history that’s been better for refinancing a mortgage. If you’re thinking of refinancing, consider these tips to help you.
First, determine why you want to refinance. Is your goal to lower your monthly payment by extending your loan back out to thirty years or are you looking to reduce the total amount of interest you will pay over the life of your loan? Are you looking to consolidate debt, or hoping to get in or out of an adjustable-rate mortgage? Whatever your reasons, be sure to pinpoint your goals of refinancing. It’s never a good idea to refinance just because it “seems like a great deal!” After you know why you want to refinance, figure out how many months of paying your new monthly payment it will take before you’ve covered the closing costs of refinancing. If you don’t plan to be in your house long-term, refinancing probably isn’t the right choice. Likewise, if you’ve only been in your house a short time before refinancing, that might not make sense either. One thing to keep in mind, is that even if your interest rate is significantly lower, if you extend the loan terms back out to thirty years you are paying over a longer period of time and therefore it might not save you money in interest over the long run. If you are considering refinancing, the best advice is to understand the terms of your current loan and any refinancing terms you are considering, crunch the numbers, and speak to a trusted advisor about your options. Remember, refinancing can be a great deal, but it isn’t for everyone.