Even when rates are low, residential property refinancing isn’t always the right choice. Here are some points to consider before you refinance.
Deciding when to refinance your home loan depends on several factors besides whether you can get a better mortgage rate than you already have. And though there are many reasons people refinance their mortgage, some are smarter financial moves than others.
What do you stand to save by refinancing?
There are two big reasons to look into residential property refinancing, to reduce your monthly mortgage payment or; to save on the overall interest you will pay on your house in the long run.
In the best case, a residential property refinancing will do both, but that doesn’t always happen. For example, if you have 25-years left on a 30-year mortgage and refinance again for a 30-year term at a lower rate, you’ll get a lower monthly payment, but may end up paying more interest in the long-run because now you’ll pay your home off over a total of 35 years. If, however, you have 25 years left on your loan and refinance with a 15-year mortgage, your monthly payment may actually go up, but you may pay tens of thousands less in interest over the long run (and you’ll have your house paid off 10 years sooner).
Although every situation is different, we would recommend refinancing your mortgage if:
- Current interest rates are at least 1 percent lower than your existing rate
- You plan on staying in your home for another 5 years (give or take)
- You anticipate being approved for the refinance loan
Deciding when to refinance is no small decision, so don’t jump on the refinance band-wagon just because other people you know are doing it. Take some time to figure out what your total costs would be, what your new monthly payments would be, and whether or not it’s the right decision for you.
Here at Real Estate Funding Solutions we are experts in our field and would love to help you decide on your residential property refinancing choices. Give us a call at 1-855-913-8637 to let us help you get started today!