If you took out the mortgage on your home when interest rates were high, your credit has improved or you need some cash to pay off high-interest debt, you may be thinking about refinancing your mortgage. These are three factors you should consider.
1. Interest Rates
One of the primary reasons people choose to refinance is to save money on interest payments. To determine whether your interest savings will be enough to cover other costs associated with the refinancing, compare the interest rate of your current mortgage to refinance rates Loganville GA. Generally, the smaller your loan balance is, the larger the difference in interest rates needs to be to result in substantial savings.
2. Terms of Your Loan
One of the downsides to refinancing is that you will usually be extending your loan term. To determine whether this extension is worth it, calculate the total cost of your current mortgage. Next, calculate the total cost of the refinanced mortgage you are considering and add in the amount you have already paid on your existing loan. If this total is less than what you would have paid on the original mortgage, then it may be worthwhile to refinance.
3. Cost of Refinancing
Most mortgage refinancing comes with closing costs you need to pay. Consider how long it will take you to save enough money on the refinance to recoup the closing costs. For example, if you are saving $150 per month, but you paid $4000 in closing costs, it will take you just under 27 months to recoup the closing costs. Some lenders may offer loans that do not have closing costs, but these loans usually come with a higher interest rate.
When deciding on refinancing a mortgage, it is important to consider these three factors. You need a complete picture of how the refinance will affect your monthly budget and the overall cost of your mortgage before you make your choice.