Refinancing a mortgage is a lot of work. But if you’re thinking about it, there are a few situations where your financial results will be well worth the effort. If you’re wondering if it makes financial sense for you to refinance your 30-year fixed rate mortgage, we’ve put together some factors to consider that will influence your decision.
Can you lower your mortgage interest rate?
Even if you lower your mortgage interest rate by less than 1%, you could benefit financially by refinancing your 30-year mortgage. If you’ve got a substantial mortgage, a rate reduction of .25% could save you money. You could be surprised to learn that your closing costs will be modest. The money you could save over the life of your mortgage will add up to more than just pocket change. If you have less than 20% equity in your home, you’ll also need to include mortgage insurance in your calculations.
You may also be able to locate refinancing options with low to minimal closing costs, including a VA Streamline or IRRRL refinance loan for Veterans and an FHA Streamline refinance loan.
Should you refinance an adjustable rate mortgage (ARM) to a low fixed-rate mortgage?
As this article is written, home loan interest rates are low, and few people are opting for adjustable rate mortgages (ARMS). But if you have an older ARM, it could make financial sense for you to refinance it to a low fixed-rate 30-year mortgage. There’s no guarantee that mortgage interest rates will remain low. Locking in your interest rate at a low APR could make excellent financial sense.
Can we refinance our mortgage to reduce our debt burden?
If you have significant equity built up in your home, you may be able to use a cash-out refinance to use the funds to pay down high interest-rate debt. If you’re paying off high-balance, high-interest rate credit cards, you could save thousands of dollars by using a cash-out refinance. This option makes sense only if you have enough equity in your home and can continue to keep your monthly mortgage payments affordable.
Finally, you may be able to refinance your mortgage by shortening the term of your loan. If you plan to stay in your home and can afford the monthly payments on a 15-year mortgage instead of a 30-year mortgage, you will save thousands of dollars by cutting the loan term in half. Contact us here at California Platinum Loans to find out if a refinance makes financial sense for your particular situation.
Sources
https://www.investopedia.com/mortgage/refinance/when-and-when-not-to-refinance-mortgage/
