There are many reasons homeowners want to refinance their mortgage. Refinancing can get you a lower monthly payment, provide cash and help you pay down debts. But before you refinance, you should be informed and make sure it's right for you.
Will You Save Money with a Refinance?
Use a refinance calculator to find out how much money you can save from lower interest rates. If you find savings with the calculator, the next step is to figure out how much closing costs you're going to have to pay. By knowing the amount you will save vs. the amount you will need to initially spend to refinance, you can determine if refinancing is right for you.
If you are one of the many who would benefit from a refinance, have a plan for what you will do with your extra savings. Some people choose to consolidate high-interest credit card debt in order to save money in the long run. Additional options are finance expensive purchases, pay for home improvements or pay down additional debts. Whatever you choose, make sure you have a plan in order to best utilize your newly found funds.
Should You Choose a Fixed or Adjustable Rate Refinance?
The answer to this question relies heavily on how long you plan to live in your home. If you are going to be in your home longer than seven years, it might make more sense to refinance to a fixed-rate mortgage and not have to worry about which way your interest rate will adjust. Many people move within 9 years, so if you're not planning on being in the home for an extended period of time it may make sense to consider an ARM mortgage.
All things considered, now is the best time to refinance to benefit from low interest rates. If you still have quite some time before your home is paid off, refinancing now and locking in a lower rate can easily save you thousands in the long run. Many people refinance homes everyday and experience lower rates and payments.