Refinancing your home can save you a lot of money in the long run. With interest rates lower than before you are able to pay less each month. However, you will want to do a little research and crunch some numbers before making this decision. Here is where you can start to make the process smoother.
How Much Lower Does your Interest Rate Have to Be?
This answer depends on a few factors. If you plan on staying in your home for years to come even a slight decrease can be beneficial over time. Don’t believe the rule that it must be at least a full point lower to be worth it. Do your research by using an online refinance calculator and find what is right for you.
Yes, You Will Need to Pay Closing Costs
This is an extra amount you will need to add in when calculating if refinancing is worth it. Most likely this cost will be lower than what you previously paid. Start by going to the bank you are with now as they may give you a deal to keep your business. You will still want to look around at other companies to see what they will offer you. Mortgage calculators online can help you with your search.
Will you Choose a 15-Year or a 30-Year Mortgage?
There are positives and negatives to both types of mortgages. If you get a 15-year mortgage you will get a lower interest rate but will need to pay more monthly. A 30-year mortgage will give you the lowest monthly costs but you will need to consider where you want to be in 30 years. Keep in mind you can always pay off your loan earlier if you can.
Considering a Fixed or Adjustable-Mortgage Rate
The last step you will want to consider is the type of mortgage you will be getting. A fixed mortgage is something you will want to consider if you plan on staying in your home for awhile because you will not have to worry about your interest rate changing. If you plan on selling your home soon you may want to consider an adjustable-rate mortgage because you can get a lower interest rate for this period of time and save money.
Refinancing your home is not meant to be stressful but it can save you money. By following these tips above you can save money without having to worry about the consequences.