Is It Time To Refinance Your Mortgage

Is It Time To Refinance Your Mortgage 1

Is It Time to​ Refinance Your Mortgage?
Have interest rates dropped since you​ first bought your house? Are you​ in​ a​ considerably better place financially and credit wise than you​ were when you​ first got your mortgage? Are you​ looking for a​ way to​ lower your monthly mortgage or​ loan payments? If any of​ the​ above are true,​ then it​ may be time to​ take a​ closer look at​ a​ refinance mortgage .​
A refinance mortgage,​ or​ 'refi' as​ it​ is​ popularly referred to,​ is​ a​ loan taken out specifically to​ pay off an​ existing loan for the​ purpose of​ lowering your current monthly payments - or​ reducing the​ total amount of​ interest that you'll pay .​
Refi loans become more popular when interest rates drop significantly,​ though there may be good reasons for you​ to​ consider a​ refinance mortgage loan even if​ the​ general interest rates have remained the​ same or​ increased .​
How does refinancing your current mortgage lower monthly payments and when should you​ consider a​ refinance mortgage loan?
Suppose that you​ bought your house with a​ mortgage loan from a​ local lender .​
Because of​ your lack of​ credit history and your decision to​ put down a​ small down payment,​ you​ ended up with an​ interest rate that was slightly higher than average .​
Five years later,​ the​ standard interest rates have dropped by nearly a​ full percentage point - which puts them nearly 3 percentage points below the​ interest rate on​ your current mortgage .​
You've been with your current employer for seven years,​ lived in​ the​ same house for five and have built a​ solid history of​ on-time payments on​ your mortgage and credit cards .​
You're in​ the​ ideal situation to​ seek a​ refinance mortgage because:
1 .​
Your credit rating nearly guarantees the​ lowest interest rate available on​ new loans.
2 .​
a​ drop of​ 3 percentage points on​ your mortgage is​ significant .​
Most experts recommend considering refinancing if​ the​ new interest rate is​ at​ least 1 full percentage point lower than your current interest rate .​
In fact,​ drops of​ as​ little as​ half a​ percentage point in​ the​ APR can significantly lower your monthly costs.
3 .​
Your original mortgage carries a​ higher interest rate than market rate because of​ financial circumstances that no longer exist .​
One other reason you​ might take out a​ refinance loan is​ to​ shorten the​ term of​ your mortgage .​
If you​ originally took out a​ 30 year mortgage at​ 5.25% APR,​ refinancing the​ loan for 20 years,​ even at​ the​ same APR,​ will lower your overall cost considerably though your monthly payments will be higher .​
Still,​ if​ you're in​ significantly better financial circumstances than you​ were when you​ took out the​ original mortgage,​ the​ overall savings could make it​ worth your while to​ refinance.
There are several factors to​ consider when deciding whether or​ not to​ refinance your existing mortgage .​
Most mortgages carry an​ early repayment penalty,​ for instance .​
There are also fees and closing costs associated with the​ new loan to​ add into the​ mix .​
You'll need to​ consider all the​ costs of​ taking out a​ new loan against the​ possible savings of​ a​ lowered interest rate before you​ decide if​ it​ makes sense to​ refinance your mortgage.

Is It Time To Refinance Your Mortgage

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