With interest rates as low as they have been, many people have been considering a refinance. For some it makes a lot of sense to do that, for others, you may want to think about it first.
For some people, it may lengthen your loan term. If you currently have a 30 yr mortgage and you decide to refinance to a new 30 yr mortgage, it will take you that much longer to pay off your home. If you decide to go to a 15 or 20 year term, you will shorten the time it takes to pay back the mortgage. You want to compare how much time is left on your current mortgage with the new mortgage to see if it's going to save you money. For some people, it's more important to lower their payment and save money every month. They may not care that it will take longer to pay off the mortgage.
Pay attention to the closing costs. Sometimes the lender may offer lower or no closing costs in exchange for a higher interest rate. Sometimes they roll them into the new mortgage. You want to know what the costs are and make sure you are comparing the costs with more than one lender. Many lenders may be very similar in costs, but you want to make sure. Compare the costs with the interest rate to make sure you are getting the best deal that you can get!
You may end up increasing your monthly payment. Depending on the type of refinance you do, it could increase that payment. If you are going from an adjustable rate to a fixed rate term, you may end up with a higher payment, but a more secure loan. If you decide to take some equity out of your home by doing a cash out refinance, it may also increase your mortgage payment. For some people, it makes sense to pay off some other debt with a cash out refinance but make sure you are not taking on too much of a mortgage. That new mortgage will be there for 15-30 years depending on the term so weigh your options before doing a cash out refinance.
Interest rates are great, we don't know which direction they are going to go in the future, but it may be worth looking into a refinance as long as you are going to be in the home long enough to recoup the costs of the refinance.
Leslie Vanderwerf, NMLS ID#335509, American Mortgage & Equity Consultants, NMLS#150953 - Email - Website
