Are you thinking about refinancing your mortgage? While a lot of people consider this option for a multitude of reasons, there are some things to consider before you make the final decision on whether or not it’s best for you.
Making big decisions like this one require knowledge, so to help you choose wisely, here are 5 important factors to take into consideration before refinancing your mortgage:
1. You will pay new lending costs
When it comes to refinancing your mortgage, there are many hidden costs that you’re going to want to consider. What we mean is that it’s going to cost you more than you might have thought it would. Some examples of fees could be for appraisal, discount points, preparation of documents, loan origination, title search, application, and more, with all of these fees ranging from under $100 to $900. In some cases, it may actually benefit you to consider reverse mortgage refinancing instead of trying to figure out what to do about all these extra costs when trying to refinance your mortgage.
2. It may not actually save you money
Most people who choose to refinance their mortgage do so with the idea that they’re going to be saving money. Except, this isn’t always the case. Factors which involve how long you’ll be staying in the home, the interest rate cut you’re acquiring, and the initial fees all have an impact on whether you’ll actually walk away from this experience with more money in your pocket or not. Before choosing to finance your home, go over the mathematics of it all to crunch numbers so you can be sure it’s beneficial to your financial health and your interest.
3. You’re restarting the timeline on your payments
Restarting the timeline of your mortgage is something you can consider when refinancing and while this could be good in a way if you’ve been wanting to pay off the home in a shorter amount of time, keep in mind that your monthly payments could go up. It’s a matter of determining if this is something that you can pull off and is also based on how long you want to be in your home. If things have changed since you first bought your home and your finances have improved, this could actually be a great way for you to get your home paid off faster. It simply depends on your individual situation and financial health.
4. You could actually get cash with your finance
How does this work? Well, instead of committing to a loan that is for the balance of what you need to pay on your mortgage, go ahead and refinance for more and “keep the change.” For example, you may owe $100,000 on your mortgage but the lenders will allow you to get a loan for up to $200,000, consider it could be beneficial for you and your family at this time.
5. You could rid yourself of private mortgage insurance
While this is definitely not a factor for everyone and involves a number of things to consider, if you had to get a PMI when you first took out a loan, with refinancing your mortgage, you could do away with it. Keep in mind that everything from whether or not your home’s value has increased and the percentage for your new loan are factors that go into play here and you may not be qualified for getting rid of the private mortgage insurance.
As with many things having to do with loans and finances, there are pros and cons to refinancing your mortgage. If in doubt, speak with a professional to find out if it’s the best option for your particular situation. It could save you money and be absolutely worth it, or it may be a decision you end up regretting. As with anything money related, be careful not to rush into it.