A mortgage refinance may sound like a good idea, but it is not always the right choice in all circumstances. If you’re fortunate enough to qualify for a refinance, it is important to make sure that you will benefit from it. It should make financial sense and help you save more for the long-term.
Rate and Term Refinancing
Refinance mortgage experts at Altius Mortgage Group note that many homeowners choose this to save more money. This works by refinancing the remaining home loan balance for a lower interest rate or a manageable mortgage term. The latter refers to the number of years it will take you pay the loan balance. It is good to know that this type of refinance can have lower interest rates than cash-out refinance.
Some owners refinance their mortgage to pay off existing debt or use the money for other purposes. This works by taking out a new a loan for more than what you owed, then you get the difference in cash. Deciding whether a cash-refinance is the right choice depends on how much you would save every month and how do you want to spend the cashed out money.
Considering Your Financial Goals
It is advisable to refinance to lower your monthly payments. You can use a mortgage calculator to get an idea of how much your new payment would be. It is ideal to choose a shorter-term mortgage with slightly higher payment to lower the total interest and own your home quickly.
This may work well if you have a lot of disposable income. Financial experts, however, suggest not to get too focused on paying their loan and ignoring other financial goals. Paying your loan faster is a good ideal, but it is advisable to have money for retirement and college savings, as well as paying off debts, especially those with higher interest.
If you’re thinking of refinancing, be sure to weigh its pros and cons. You should also talk to a reliable lender to learn more about interest rates and loan term.