If you own a home, you likely want to have a lower monthly payment on your mortgage and pay less in interest each year. Refinancing is a great way of saving a significant amount of money over the life of the loan. It also includes closing costs, however.
If you want to know if you can benefit from refinancing, there are a few key facts to consider.
When Refinancing Is Beneficial
Refinancing a home is ideal for those who already have a high interest rate with their current loan. Those who have an adjustable-rate mortgage can also switch to a fixed-rate mortgage to avoid having an increase in their interest rate in the future for added savings. Switching to a fixed-rate mortgage can also reduce the risk of foreclosure to ensure that you can continue to afford the payments. It not only allows you to save money, but it can also help you to build equity faster on your property.
More Info: 6 Solid Strategies for Refinancing Your Home
When Refinancing Pays Off
The timing of when you decide to refinance will determine if it will prove to be beneficial. It’s important to refinance your home when interest rates are low. Those who plan to continue living in the home long-term are most benefited by refinancing because of the savings that accumulate over the years. Those who don’t plan to own the property forever can also choose a short-term loan if you can afford a higher monthly payment to pay off the mortgage in a shorter amount of time.
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The Right Time to Refinance
You may be wondering, “Is now a good time to refinance my home mortgage?” Experts used to suggest that you should refinance if you can reduce your interest rate by at least two percent, but now homeowners are recommended to refinance if they can obtain an interest rate that is one percent lower.
Resource: When to Refinance Your Mortgage
When Refinancing Is a Bad Idea
Refinancing is not useful if the break-even period is too long or the long-term costs are too high. It’s also important to wait to refinance if you can’t afford the closing costs. Some people opt to roll the closing costs into the home loan, but that will cause you to spend more on interest rates.
Refinancing is a great option if the conditions are right and if you have the chance to obtain a lower interest rate. By understanding the risks involved and if you’re the right candidate, it can save you thousands of dollars over time.
Keeping your property value up is a lot of work, but it’s worth it. Consult with our team at Gordy Marks Real Estate to ensure that your property investments and strategies retain their value. Check out our online blog content for the latest insights into property care.