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What Does it Mean to Refinance Your Mortgage?

What Does it Mean to Refinance Your Mortgage?

We have all heard that it’s a great time to refinance your home mortgage but what does that really mean? How will it change my payments? Is it really a benefit to me? Is it too risky right now? Let’s look into a few of these questions to help determine if now is the right time for you to call a Mortgage Coach and assess if you should refinance your home. 

All refinancing your mortgage means, is that you are replacing your original home loan with a new loan that usually offers a better rate and term. This typically means you will be saving money. (A great benefit, right?)

How does it save you money? If you purchased your home at a time when interest rates were higher than they are today – refinancing to a lower rate could save you money monthly, as well as a significant amount over time. Refinancing to a lower interest rate means you will pay less over the life of the loan. 

While this sounds like the perfect scenario, remember there are always other factors to consider. There are transaction costs that will be associated with refinancing your home; so be sure that you are going to stay in your home long enough to recoup these costs. After you recover these costs you will really begin to realize the savings from the lower interest rate. So while this is definitely a factor to consider, I wouldn’t necessarily consider it a major risk. Also, be sure you have the money on hand (or through equity in your home) to pay for these costs up front without taking a major hit to your savings account. 

I cannot stress this enough – each person’s situation is different! So what works for me, may not be the best option for you. Now is a great time to call your Mortgage Coach to evaluate your loan situation! Rates are near historic lows and this could add up to major savings for you, but a Mortgage Coach can help you ensure you’re making a smart financial decision.