No doubt you’ve heard a lot about “refinancing,” what with all the chatter recently about historically low interest rates.
While you may know there is no time like the present to refinance, you need to do your homework. Like the terms you agreed to when you first bought your home, refinancing is not a one-size-fits-all process.
Regardless of your motivation for refinancing, either to lower your monthly mortgage payment or to shrink the amount of time it takes for you to pay off your loan, you can easily save thousands of dollars on the life of your loan.
Yes, the homework is worth it!
Two things to keep in mind as you consider refinancing:
First, what are your goals? To lower your monthly payment? To reduce the length of your loan? To decrease the total interest expense over the life of the mortgage? Or perhaps to free up cash to help your children with the cost of college education or the purchase of their first car?
Say you are in a 30-year mortgage, with the goal of reducing your monthly payment.
Because interest rates are at or near record lows, refinancing to another 30-year mortgage at a new, lower interest rate may dramatically shrink what you’ll pay each month.
Or, if “time,” as opposed to “monthly savings” is more your goal, then you’d probably want to lock into a new, shorter term mortgage. For our 30-year mortgage holder above, they may want to opt to a 15-year note. In this case, they may pay a little bit more each month, but the savings happens on the back-end – when you aren’t paying the additional 10 or 15-year’s worth of interest. Typically, the shorter the term of your loan, the lower the interest rate that will be available to you.
Second, what are the costs and how can you determine the time frame it will take to recoup the closing costs?
Our mortgage loan officers can assist you with a break-even analysis. This is a valuable step to help you determine just how long it will take you to, well, “break even” on a mortgage refinance. We consider: current interest rates, the new potential rate, closing costs and how long you plan to stay in your home.
In the end, it all adds up!
Our mortgage team is here to help you achieve your goals. Get started by contacting us today at 402.885.6900.