The current rates mortgage might have you considering talking to your lender. However, rather than jumping on the bandwagon, you should consider when is the best time to refinance for you personally. Otherwise, the time and resources to refinance might not be worth it in the end.
So, when is the best time to refinance? The best period will depend on your personal financial circumstances as well as what financial options are available. Check out the five times you should refinance mortgage terms.
The longer it takes for you to pay the principal on your mortgage, the more you will pay in interest charges. Most mortgages are set for 30 years, meaning the monthly payments are based on completing the loan in exactly 30 years.
For example, on a $200,000 loan, you will pay almost $135,500 in interest charges in 30 years. But, with a 15-year term, the same loan amount will cost you less than $62,700. That is a 53 percent savings of $72,800.
However, a shorter term also means a higher monthly obligation. Not including insurance, taxes, or other payments, the monthly payments for a $200,000 loan would be about $1,215 for a 30-year term or $1,750 for a 15-year term. That $535 difference could save you tens of thousands of dollars.
Perhaps when you first bought your home, an additional $500 monthly payment was too much for you to handle with your other expenses. After a few years of keeping to budget and earning more, you can start saving money with a refinance home loan.
A refinance home loan pays off your existing mortgage and replaces it with a new loan with different rates and terms. By refinancing, you may be able to get a different:
- Interest rate.
- Monthly payment.
- Monthly interest charge.
Most lenders have refinancing fees, so you should make sure that the amount you will save with a new loan outweighs the expenses. If you are close to having 20 percent equity in your home, you may be able to drop your mortgage insurance.
By Mathew Sams –