Are you considering refinancing your home to take advantage of the historically low rates? Home refinancing can be a great way to cut down on your mortgage payment and potentially save money. Here are some common questions you are likely to have about home refinancing.
Will You Always Save Money By Refinancing?
The main reason that people want to refinance their homes is to save money. They either want to reduce their mortgage payments to something more reasonable or save money over the course of the entire mortgage. It is not always clear if you are going to save money until you look at your specific financial situation. If you want to reduce your monthly mortgage payment because you don't have much left over at the end of the month, it is relatively simple to find out if home refinancing will work out in your favor. Simply look at what that new monthly mortgage payment will be, and compare it to what you're currently paying.
However, things are a bit different if you want to save money over the entire length of the mortgage. You must look at the costs associated with getting a refinance, since you'll be paying loan origination fees, the appraisal fee, and any other costs associated with closing on your refinance. You must then look at how much you'll save each month, and when you'll break even on the refinance. Plan on selling before that? Then refinancing isn't a great idea.
Can You Get A Different Type Of Loan?
Did you get your home with a 30-year fixed-rate mortgage, and finding that you're able to pay off the loan faster? Know that you are not forced to get the exact same mortgage product when you refinance your home. You can change that 30-year mortgage to a 15-year mortgage, or even get an adjustable-rate mortgage if that is what you want. A common reason why people refinance is that they have an FHA loan that requires them to pay mortgage insurance indefinitely, and they want to switch to a conventional mortgage that doesn't have mortgage insurance. As long as you're able to get approved for the mortgage, it is an option for you.
Have more questions about refinancing your home? Reach out to a mortgage lender in your area, and they will be able to answer any questions you may have about the process.