Finding the right mortgage is a complicated process. And, on top of that again refinancing it sounds more mess. But,
Should You Refinance?
Well, to start with, you can save money! Refinancing your mortgage can help you in these possible ways:
Getting a lower interest rate, reducing your monthly payments and by reducing the term of the loan, for example, from a 30-year loan to a 15- year loan (saving on the interest rates)
Sometimes, applicants also refinance to convert their variable loan to a fixed loan or vice-versa. People also refinance to convert their adjustable loan to a fixed loan. The main purpose of this type of refinancing is to get the security. When interest rates are low, fixed loans are popular. Whereas, variable loans are helpful if the interest rates are higher. In an attempt to lock the lower rates homeowners choose refinancing.
The third reason is to consolidate their debt and trade high-interest mortgage to a low-rate mortgage. In so many cases it results in tax savings.
Knowing all that, it is still a complex question to answer; Should You Refinance?
A conventional wisdom of refinancing can work if you save at least 2% on your entire mortgage. Since every situation is different and no two homeowners are in the exact same situation, it is difficult to give a definite solution. 2% is calculated as follows:
Calculate the total cost of the refinance ($1000)
Calculate the monthly savings ($50)
Divide the total cost of the refinance to the monthly savings. (1000/50 = 20 months ). Here, 20 months is your break time. If your break time is shorter than your plan to stay in the same house, refinancing makes sense.
If you have a mortgage with no conversion option but with a balloon provision, refinancing is a wiser decision. At this time refinancing should be done few months before the due date.
Consulting a professional and experienced mortgage professional is the best option in the matters. As our brokers work for our customers, get the non-biased advice! So what are you waiting for? Call us now and know if mortgage refinancing is for you!