If you have a mortgage on your home, you might be considering refinancing the home. In some instances this is a great option that can save you money. In other cases, it is best to stick with your current lender and rate. The key is knowing what the best choice is for you. Here are some questions you can ask yourself before refinancing your home.
Would We Have to Pay Closing Costs Again?
One of the first things to consider is the amount that you would be paying in closing costs. You might hear from a lender that they can reduce your interest rate on the house, and this would be great because it would lower your payments. However, once you factor in the amount that they will charge you in closing costs, you may be surprised that in the long run you will save no money or even pay more.
Some lenders will allow you to roll your closing costs into the cost of the mortgage, which, depending on the interest rate, may be worth it. The question that you need to ask yourself is how much you will realistically save by refinancing? Do the math, and don't be deceived by flashy sales. Instead, talk to a experienced loan officer to figure out if refinancing is the best option.
How Much Longer Until the Loan Is Paid Off?
When you refinance the loan, you need to ask how refinancing will affect the amount of time that it will take to pay the loan off. For example, if you have a 15-year loan and want to refinance in year 7, you should ask if refinancing will now reset the 15-year loan or if your payments will continue on the 7-year plan. Some people will want to reset the 15-year plan because doing so will make the payments significantly lower. Generally, however, it is best to pay the loan off quickly, since you will save a significant amount of money in interest over time by doing so.
Do We Need a Home-Equity Loan?
Lastly, the reason many people refinance their home is to get a home-equity loan. If you need cash to improve the house or for other purposes, you may consider refinancing. It is vital that before you get a home-equity loan, you talk to a financial adviser to be sure that the loan will be the better option in the long run.
By asking yourself these questions, you can make an educated decision about whether refinancing your home is best for you. Click here for more info on home refinancing services.