You’ve been living in your house for a while and have been paying your mortgage payment every month. However, when you see on the evening news that mortgage rates are 1% cheaper than what you locked in 10 to 15 years earlier, you soon remember that you might be spending more money on interest rates than you need to. Every year, refinancing is an opportunity for millions of people who choose to give their mortgage a “health check” and lock in cheaper rates or take advantage of rising property prices to make changes to their properties.
Nobody enjoys overpaying, particularly their home!
Refinancing is now as much a part of the lending process as getting a loan to purchase a new home. A wise homeowner understands that interest rates can increase and fall with time and that by keeping track of where they are today, they will save a significant amount of money over the duration of their mortgage note by locking in a lower rate now, even though it means paying a small fee upfront. Through paying down their old mortgage and writing a new one, refinancing encourages millions of homeowners to get cheaper rates on their mortgages.
Naturally, as with any financial deal, you should thoroughly analyze all of the costs involved with refinancing as well as the possible gains and the risks. When you just have a few years left on your mortgage, refinancing is usually not a good idea and you won’t save enough money on interest to cover the fees you’ll have to spend to rewrite your mortgage. According to some experts, the safest time to refinance is when at least 40% of your monthly mortgage payment is already going toward interest payments.
If you should plan to refinance, keep in mind all of the tips we’ve discussed before while looking for a mortgage. Obtain a range of competitive bids, keep an eye on the fees, and read and comprehend the risks involved.
Another explanation that more homeowners refinance their mortgages is to “cash-out” of some of their equity as a consequence of increasing land prices. Let’s presume you have a kid who is college-ready and you need to find a way to pay for it. Your house, which cost $100,000 when you took out your 30-year mortgage twenty years ago, may now be worth $200,000. You will basically write yourself a check to pay for house renovations or other necessities by refinancing, and you’ll get the money quicker and at a higher deal than if you took out a second mortgage.
Refinancing can be one of the most beneficial investment resources available to those who use it carefully.
It not only has the potential to save you thousands of dollars in interest payments by lowering your premium, but it also helps you to take advantage of rising land prices to help pay for other life needs. Another explanation why buying a house is one of the best financial choices you can ever make.