Should You Refinance Your Home Loan?
It’s worth considering, if it works to your benefit
Refinancing involves replacing your current mortgage with a new one, either from the same financial institution or a different one. The process is similar to how you applied for your first mortgage and should involve researching your term, lender, and loan options, assembling the needed financial documents, and submitting an application for approval.
WHY DO PEOPLE REFINANCE THEIR HOME LOANS?
There are many reasons, such as:
- To take advantage of lower rates that have become available
- To lengthen the loan term for lower payments
- To tap into their home’s equity and get ready cash for college expenses, remodeling, debt consolidation, or other uses
- To eliminate private mortgage insurance (PMI), which can save money
- To get better service
WHEN DOES IT MAKE SENSE TO REFINANCE…OR NOT?
It’s important to investigate your options before deciding to refinance. It can be a good option if the new interest rate is lower than the one on your current mortgage, and the total savings will outweigh the refinancing costs. Those costs could include points (each point equals 1% of the total loan); title search, appraisal, loan origination, and credit check fees; and recording fees or transfer taxes.
Take a look at your credit score, too. It will help determine your refinance approval and the interest rate you are offered. A lower credit score may translate into a higher interest rate, which may negate the benefit of refinancing.
Use our personalized estimate calculator to explore your options, including refinancing your existing home loan balance or refinancing with cash out.
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