Is Refinancing Your Home The Right Option For You?

If your mortgage is on a fixed-rate term and rates appear to be dropping, it would make sense for you to consider refinancing in order to take advantage of the lower rates. However, is refinancing really for you? As with most things that have to do with finance, there are a lot of things to consider. Refinancing is a practical option but you have to keep in mind that it also costs money. And depending on the kind of situation you are in, refinancing might actually cost you more instead of letting you save.

Here are some things for you to think about to help you figure out if refinancing is indeed a viable option for you:

If your mortgage has adjustable rates and yours was reset to a higher one, refinancing is looking rather good for you. The good thing about mortgages with adjustable rates is that they can change interest rates over a loan term. Compare how much you’ll be paying if you opt for a rate adjustment versus opting for fixed-rate mortgages to determine which one will let you save more.

Take note how long it would take you to break even with your mortgage. If it would take you longer to break even than the period of time you are actually planning on staying on the property, consider refinancing if it would make you break even sooner with your loan.

Refinancing also affects terms so keep that in mind. Say, you’ve been making payments on a 30-year term for the last 10 years. That means you should have 20 more years to go, right? Refinancing can scrape off those 10 years you’ve been paying if you opt for a new 30-year term when you refinance. However, you can also opt to refinance with shorter terms, like 15 years, if you have enough funds and would like to finish payments sooner.