By Chris O’Shea
Tips to know if you should refinance your mortgage.
Mortgage rates have been on the decline since late 2018. If you’re a homeowner, there’s a good chance you’re paying a higher interest rate on your loan than what is currently available. Perhaps it’s time to refinance your mortgage. Here are some things to consider before you do.
Is it Worth It?
One big factor in refinancing is how long you plan on living in your home. Refinancing a mortgage means savings, yes, but it also comes with a fee. If you’re not staying at your home long enough to absorb the fee and reap the savings — think at least five years — then it’s likely not a good idea to refinance.
Cost Considerations
Consider how much the refinancing will cost once it’s complete.
- Loan Terms. What you’ll pay depends on your lender and loan terms.
- Loan Fees. You could pay anywhere from $200 to three percent of your new loan.
- Closing Costs. As for closing costs, sometimes you can roll them into the new loan so you don’t have to pay out of pocket.
- Total Costs. If the total cost of refinancing makes financial sense, then you should go through with it.
Saving Potential
One reason to refinance your mortgage is to gain some wiggle room in your budget. You get a lower rate and with it a few extra hundred dollars per month. This is a good idea if you use that cash toward your goals.
Do One Thing: Don’t refinance and reap the savings without a plan in place for that extra cash.