What is the Typical Rule of Thumb When Looking into Mortgage Refinancing?
Mortgage refinancing involves taking out a new home loan to pay off your existing one. There are many reasons why a homeowner might consider refinancing, but the most common reason is to consolidate other debt or lower your interest rate. Not only does consolidating high interest debt save homeowners hundreds of dollars every year, but it also helps make monthly bills more manageable. But when is the right time to refinance? Here's how to determine whether mortgage refinancing would be beneficial to you.
Consider Interest Rates on Unsecured Debt
A great exercise to do, is to add up all of the interest you are paying monthly on your high interest credit cards and loans. Do you have the ability to consolidate those loans into your mortgage? Circumstances vary, however, if you are paying over 10% on loans outside of your mortgage, there is likely enough savings to consider mortgage refinancing. Before applying for mortgage refinancing, be sure to contact a mortgage broker to see if this option will be beneficial to you.
Calculate Extra Costs
Refinancing can incur some administrative costs, including closing costs, mortgage penalties, and appraisal fees. Before seeking mortgage refinancing, it's important that you take these extra costs into consideration. If you are consolidating debt, the savings are likely enough to recoup the closing costs on the new loan. If, however, you are only refinancing for a lower interest rate, it is important to take these costs into consideration and make sure the savings are still there and it still makes financial sense.
Refinancing your home loan can be a great way to reduce your interest rate, but it's important to consider your financial goals and determine whether refinancing would be advantageous in your situation. Contact us to discuss whether mortgage refinancing is the right solution for you.Request Mortgage Info