With our historically low mortgage interest rates, you may be weighing the pros and cons of refinancing your home.
While it may seem like a no-brainer decision — lower is better after all, right? — we believe it requires careful thought and consideration.
Does it make sense for you and your financial situation? Should you? Shouldn’t you? Of course, the answer is personal to you. And this is a discussion to have with a mortgage professional that you trust.
However, here are some general guidelines that we suggest you consider …
Amount of Interest Payments
Pros — With a lower interest rate, you may reduce your overall interest payments over the life of the loan.
Cons — If your new loan is for a longer period of time than you currently have left on your existing loan, you might not actually save and may even add to the overall interest you have left to pay.
Pros — With a lower interest rate, you may reduce your monthly payments, allowing you to use that money for something else.
Cons — With a new loan, you may add more time than you currently have left on your current loan. You may pay less per month now, but you’ll be paying for more months. This could mean that you haven’t actually saved in the end.
Pros — If you need the cash to pay for something right now (other debts, medical expenses, higher education, business, etc.), refinancing your home allows you to “cash out” some of the equity you have in the home.
Cons — You’ll increase the amount you owe on your house and possibly the total interest owed as well.
Term of the New Loan
Pros — You may be able to shorten the overall term of your mortgage while keeping your payments about the same. This would potentially save you in the total amount of interest you pay as well as allow you to be mortgage-free sooner.
Cons — Your monthly payment may go up if you shorten the term of your loan. Or you may extend the time you will be paying on the loan if your new term is more than the remaining time you have left on your current mortgage.
There are many pros and cons of refinancing your home. These are just a few.
We are experienced real estate professionals, and while we’re not mortgage loan officers, we’d love to have a conversation with you about your particular situation to see if we can help provide clarity.
Send us a message or call us at 559-490-0207 today.