For homeowners, a common question is, “Should I refinance?” The answer that is right for you depends on your circumstances and long-term financial goals. Your trusted Loan Originator at First Choice Loan Services Inc. is here to offer you expert guidance custom fit to meet your needs!
When refinancing, your lender pays off your existing mortgage and then extends a new mortgage to you. Restarting your mortgage may sound like a step backwards, but the benefits of refinancing can outweigh the commitment to a new home loan. When you choose to refinance, you could be able to:
- Lower your vulnerability to a variable interest rate by changing from an adjustable rate mortgage to a fixed rate mortgage.
- Lengthen the repayment term to decrease your monthly mortgage payments.
- Decrease interest costs over the life of the loan with a lower mortgage interest rate.
- Pay off your loan quicker with a shortened loan term.
- Draw some cash out from the existing home equity and free up funds to use towards retirement, tuition, home improvements and more.
The benefits of refinancing are clear, but when do you know if it’s the right time to refinance your home?
In general, if your mortgage rate is higher than current interest rates, then it’s typically a good idea to refinance. There are other circumstances in which it may be wise to opt for refinancing, such as:
- If your home value has appreciated in value, refinancing can help you to take advantage of your home’s increased equity.
- If mortgage interest rates have fallen 1/2% to 5/8% below your current interest rate, then refinancing can help to shorten the terms of your repayment or lower your monthly payment while maintaining a comparable repayment term.
- If it’s early in the life of your mortgage term and payments are going mostly toward interest, then refinancing can help more compared to later in the life of the mortgage when payments are being directed more toward principal than interest.
There are many factors to consider when choosing whether or not to refinance, including your long-term financial goals and how long you intend to stay in your current home. You’ll want to base your decision to refinance on the bigger picture. Be sure to speak with a First Choice Loan Services Loan Originator to understand the advantages and disadvantages of refinancing.