How Do I Know When It's Right For Me to Refinance My Home Mortgage

How Do I Know When It's Right For Me to Refinance My Home Mortgage



As many of you know, mortgage rates have dropped to historic lows in the past two months. A question I am constantly asked is " how much lower do rates have to go, for me to consider refinancing my mortgage? This is a great question, and one I will shed some light on here.When thinking about refinancing your mortgage the most important thing to consider is exactly how this refinance will benefit you. If for example you are simply changing your existing mortgage for a new one to take advantage of the new lower interest rates, consider the following: Yes a drop in rates sounds wonderful, but remember there are closing costs associated with refinancing your loan. In many cases these costs can add up to thousands of dollars. With this in mind, it's very important to know exactly what your new payment will be and how much, or how little that payment will save you on a monthly basis. Once you have determined that number you will be in a much better position to know if refinancing is right for you. I like to see for example, that closing costs on your new mortgage can be recaptured within 1 to 3 years, depending on how long you are planning on staying in your home.As well as saving money each month think about the term of your current mortgage vs. starting a new one. If you have a relatively long time left to go on your mortgage refinancing can save your huge amounts of money over the next 25 or 30 years and can certainly make sense. On the other hand, if you are far into your current loan, and paying large amount of principal each month, going back to a new longer term mortgage may not be the smartest move. Remember, the shorter the term of your mortgage the lower the effective interest rate isIn addition to refinancing simply to get a new lower rate, Refinancing to consolidate two mortgages, or other debts as well as converting an adjustable rate mortgage for a low interest fixed rate loan can be very advantageous.I recommend that you reach out to your mortgage professional and together look at different refinancing scenarios. See in black and what the numbers are. Only through this process will you know for sure if refinancing is right for you.