If you're a homeowner, mortgage refinancing might be worth considering — even if your mortgage is only a year old. In the following Save and Succeed example, Todd and Amy are interested in refinancing their home to save money. They have been researching mortgage refinance loans, but they have different goals: Todd wants to make lower monthly payments, while Amy wants to pay the house off quicker. View the Save and Succeed Net Benefit Case Study.
Home Mortgage Refinancing
Refinancing refers to the attainment of a new loan to take the place of an older one. Refinancing is classified as "rate and term" or "cash-out." There are many reasons people opt for a refinance, some of which are listed below:
A Lower Interest Rate
A lower interest rate is one of the main reasons people tend to refinance. A suitably reduced interest rate may allow a person to save a considerable amount of money along with reduced monthly installments. Although it can be challenging to find a mortgage package to meet one's exact preferences, refinancing may considerably reduce payments.
An upfront closing cost accompanies the refinancing of a mortgage because it is a new loan replacing the previous mortgage loan.
A Shorter Time Frame
Some people plan to get rid of their loan in a shorter time-frame than the period they previously selected. Refinancing provides an option to do so conveniently. This is preferred by debtors when:
- Interest rates drop
- There is an improvement in the debtor's financial condition
The immediate result is the increase in the monthly payback, but refinancing to switch to a shorter period proves to be beneficial in the long-run. Monthly payments can be roughly estimated, but a direct consultation of a creditor can give accurate figures before the commencement of mortgage refinancing.
Why should you refinance?
Suppose the current value of your home has increased. In that case, it may make sense to refinance at a better rate, or refinance to consolidate debt, or plan a home improvement project. If your home value has remained stable or you are in an area where your home's value has declined, this may not be the best option for you. Use our Refinance Interest Savings calculator to see how much you can save!
If made wisely, a mortgage-financing decision can accelerate the process of eliminating debt and provide financial peace of mind. View the refinance checklist, learn more about refinancing and let Metro Credit Union Mortgage help you make the best decision for your finances!