Wondering if you should look for a new mortgage? Refinancing your home can feel like a big deal. True, you have to pay closing costs and possibly points, but refinancing with a new mortgage online can save you money on your monthly payments, reduce your interest rate, or reduce the length of your loan by years. The following conditions may signify itâ€™s time to consider refinancing:
The Federal Government Has Lowered Interest Rates
It only makes financial sense to refinance if youâ€™re going to get at least a percentage point less than what youâ€™re currently paying.
A Cost Benefit Analysis Comes Out in Your Favor
Hereâ€™s what you need to figure out: Divide the cost of your refinance package (to determine this, add up the closing costs and fees) by the amount of money you will save each month. This will give you a number equivalent to how many months will pass before you will actually be saving money on the whole refinancing deal. Now compare this number to the number of months you expect to live in your home. If youâ€™re going to stay in your home for a long time, youâ€™ll reap a bigger benefit from a refinance than if youâ€™re planning to sell anytime soon.
If Youâ€™ve Cleaned up Your Credit History
Sometimes a tarnished credit history can negatively affect your interest rate. If your credit score was less than stellar when you bought your house, but youâ€™ve made successful efforts to clean up your credit history and now have a better credit score, you may want to investigate what kind of savings your improved score can bring you.
You Want to Pay Your House Off Quickly
If youâ€™ve decided you want to discipline yourself to pay off your house quickly, you can refinance to a fifteen-year loan instead of a thirty-year loan. Youâ€™ll build equity quickly and force yourself to pay off your home before your friends are even halfway through a commitment to a mortgage.
When Your Current Loan Is Going to Cost You a Bundle
If your monthly payments are about to balloon because you got an adjustable rate mortgage (referred to as an ARM), you may want to refinance to fixed rate mortgage, even if interest rates havenâ€™t gone down. In this case, you got to enjoy the lower interest rates of the early piece of the ARM loan, but now are protecting yourself from the high payments that will come due in the secondary piece of the loan. â€¨â€¨In any case, youâ€™ll need to do a bit of math before deciding to refinance with a new mortgage online.