withAnd with the prospect of relief unknown, it may be difficult for many Americans to make ends meet. This is especially true for homeowners who are burdened with a hefty mortgage payment each month.
Mortgage refinance rates have been near historic lows in recent years and have ticked up ever since. But they can still be low enough to benefit homeowners with high interest rates. It all depends on what the initial rate was and how much lower they can get with the current one. A rate that is just one point lower can save thousands of dollars over the life of the loan.
If you’re looking to get a better rate or change your loan term, start exploring your mortgage refinancing options here now or use the table below to check your eligibility.
3 Consider mortgage refinancing
Mortgage terms are often set at 30 years, making quick repayment unlikely. However, you can always refinance your mortgage.
Mortgage refinancing offers two main benefits to the homeowner. It can reduce the cost of mortgage payments by replacing the current loan with a new loan with a lower interest rate, and it can help accelerate the payoff from the initial 30 years to a shorter time frame, such as 20 or 15 years.
As you begin the mortgage refinancing process, make sure you take these factors into consideration:
Your long-term plan for your home
Are you in your “forever home”? Not planning to move anytime soon? Then mortgage refinancing probably makes sense for you and your budget. The money you can potentially save by paying a lower interest rate can be used to help pay other bills, be used for household repairs, or saved each month instead.
Find out if you could benefit from a refinance today. Check out today’s rates and see what you may qualify for using the table below or simply get started.
Just remember, if you’re not sure about your long-term plans and right away — or even in the next five years — mortgage refinancing probably isn’t for you. Because, just like a traditional mortgage, you have to make paymentson your new loan. Closing costs range in price and can average around $7,000.
For example: If your new rate is $100 cheaper per month but you pay $7,000 off the refinance, it will take you about six years to break even. Again, this probably makes sense if you’re planning to stay in the home long-term. If not, reconsider.
Removal of PMI
Required by most lenders when the home buyer’s deposit is less than 20%. This is usually rolled into the monthly mortgage payment.
However, you may be able to eliminate PMI by refinancing (assuming your home has appreciated in value since the initial purchase or you haven’t reached the 20% threshold). This is especially true in the current economic environment, with rising home prices. If your home’s value has increased in recent years, a refinance can help lower your interest rate and offset PMI.
A higher monthly payment
A lower interest rate does not automatically mean lower payments each month. Also the period for which you are refinancing. You have to decide which option is best for you.
For example, a $300,000 mortgage at 6% interest over 30 years would cost about $1800 a month. That same mortgage, at a lower rate of 4% spread over 15 years, would cost $2200 monthly – $420 more. Because, even though the interest rate has decreased, the repayment period has been cut in half.
That doesn’t mean refinancing isn’t still worth pursuing.Beneficial to many homeowners. It’s just something to be aware of when weighing the pros and cons. In this example: Can a larger monthly mortgage pay off by reducing the length of the loan? Only the home owner can answer this question.
Like many personal financial decisions, mortgage refinancing is unique to your own circumstances and preferences. As refinancing rates have been low in recent years, it may make sense to pursue this option. Just make sure you are well versedbefore acting.
If you think you want to refinance before the rate changes, you can start the process now. Or use the table below to crunch the numbers.
Consider a cash-out refinance or reverse mortgage
Depending on your personal financial situation and your goals aor Can be an attractive alternative to a traditional refinance. Here’s how each works:
- Cash-out refinancing: This is when you take out a new mortgage loan for more than your current loan. Then you use the new loan to pay off the current loan and take the difference (between the loans). .
- Reverse mortgage: A Allows homeowners (62 and older) who have paid off or paid off most of their mortgage in full, to take a portion of their home equity. This will qualify as tax free income. However, it must be paid if the homeowner dies or elects to sell the home.