Refinancing your mortgage can often be an attractive option. After all, if you have an adjustable interest rate, your monthly payments may have gone through the roof. Of maybe you have earned some equity in your house and have a remodeling project on your mind that could be paid for by the extra cash that refinancing would give you.
But you have to weigh the benefits of refinancing against the costs. There are usually thousands if not tens of thousands of dollars in fees incurred every time you refinance. This might not matter to you too much now, but it does get tacked onto your mortgage and could mean you’ll be paying it off for longer.
Reasons to Refinance
Usually people refinance for one of three reasons. There is the chance to lower your monthly mortgage payments, the possibility of paying off your mortgage faster, or borrowing cash against the equity you have in your property, maybe for a remodeling project or for buying a vehicle.
Whether or not it’s a good idea for you to refinance is basically a mathematical question, but then there is also the issue of what is happening right now. If you need a new roof before winter no matter what, then it may not matter to you so much that refinancing to get that extra money could add years onto your mortgage.
Interest rates will basically dictate whether or not refinancing is a good idea for you. Depending on what your current interest rate is, what the going market rates are, and whether the mortgage interest rates are fixed are variable, refinancing might just be the best option for you. If you do your research online, you can find a good mortgage payment calculator that can help you do the math and decide what your monthly payments would be with a new mortgage and how soon you would be able to pay it off. Once you have done the preliminary research online and gotten an idea of what’s out there, then it is probably time to talk to your lender.
They can talk to you more about mortgage refinancing costs, but the closing costs usually fall into three categories. There are lender fees, third-party fees, and pre-paid items. These costs all together usually come to about 2-3% of your mortgage amount. If these costs are outweighed by the financial benefits of refinancing, then it is probably the right decision for you.
