Mortgage refinancing is not for everyone in the current rate environment, although select homeowners can still benefit.

Georgeta Olaru/500px

The start of a new year marks an opportunity for re-evaluation, especially when it comes to personal finances. Probably had one investment Have you considered one before or? Insurance policy You will feel safe. Then now might be a good time to pursue it.

Homeowners looking to cut corners and save money, meanwhile, can turn to mortgage refinancing.

Although not as attractive as it was during the height of the epidemic (when rates were near historic lows), Mortgage refinancing This can be valuable for several reasons. The Benefits of refinancing your mortgage Specific to your personal circumstances and long-term goals. And even though rates were higher in 2020 (between 6% and 7% now compared to around 3% then), it may be beneficial to act now before they rise again.

If you’re considering a mortgage refinance, start by answering a few simple questions here to find out if it’s right for you.

Is mortgage refinancing worth it?

Mortgage refinancing is not for everyone in the current rate environment. But if you fall into the following categories, it might still be worth it.

Homeowners who want to pay off their loans early

Refinancing isn’t just for those who want to lower their monthly mortgage payments. It is also beneficial for owners who wish to pay off their loan sooner than initially expected. When you take out a mortgage refinance loan you are essentially replacing your existing loan, preferably with better terms. So if your first loan was for 30 years but you now have the ability to pay it off faster, you may want to refinance to a 15-year term instead.

This will free up cash that you would have otherwise spent over the length of the initial term. It will also save you money in the long run because you won’t be paying for the interest that was tacked on over the longer mortgage term.

Just know that consolidating your loan term will increase your monthly payment. Because you’re paying off more debt in a shorter period of time, you won’t see many short-term savings benefits. But if you want to save for the long term — and can use the cash you’re currently paying on your mortgage for something else — it might make sense to refinance for a short time now.

You can easily see if a mortgage refinance loan makes sense for you here.

Homeowners with adjustable rate mortgages

Mortgage refinancing is perhaps best known for saving homeowners money by reducing interest rates and thus their monthly mortgage payments. But it can also be advantageous for one simple reason: It can provide some predictability in the mortgage repayment process. Specifically, you can refinance your current mortgage from a fixed-rate mortgage (otherwise known as an ARM) to an adjustable-rate mortgage.

Adjustable rate mortgages can be easier to pay off early if the initial rate is generally low. But that’s just the beginning. Adjustable rate mortgages are just that: adjustable. So what you pay in one year may not be what you pay in another year and may not be what you pay in the future. This can lead to stress and financial anxiety, especially in an adverse rate environment.

But mortgage refinancing, assuming the owner has favorable credit, allows permanent restructuring of the mortgage at a fixed rate. This will eliminate the confusion and anxiety associated with an adjustable rate mortgage and allow the homeowner to budget more efficiently – while guaranteeing that what they pay this month will be the same as what they pay in years to come.

Homeowners who can lower their interest rates

Granted, this team is smaller than ever. But, again, everyone’s personal situation is different. Perhaps the current interest rates are still better than what you were originally offered. Then a refinance loan may make sense. “Better,” in this case is usually a full percentage point lower than your current rate.

Which homeowners fall into this category? Typically, those who had bad credit – and thus higher interest rates – when they initially applied. Homeowners who took out their loans during a time of high rates, regardless of their credit at the time, may benefit from refinancing now.

Do the math. Compare what you’re paying now with what you’re paying if you can refinance. Just remember that you have to pay Closing costs Upon any refinancing. So make sure you plan to stay in your home long enough to recover out-of-pocket expenses.

Use the calculator below to determine if refinancing makes sense for you.

Bottom line

2020 marks a historic opportunity for homeowners to refinance their mortgage And while rates have risen in recent months, there are still some borrowers who could benefit from acting now.

If you want to pay off your mortgage sooner, switch from an ARM to a fixed-rate mortgage, or lower your current interest rate by a full percentage point (or more) it may make sense to refinance now.

Answer a few simple questions here and get started.

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