30 Jul Is Refinancing a Mortgage Worth It?

Refinancing your mortgage can be a wise financial decision since it may result in monthly payment savings or lower overall interest costs over the course of your home loan.

Consider your options carefully before planning to apply refinancing mortgage in Surrey. A financial analysis that compares the cost of refinancing the loan to any savings you may realize will help you determine whether refinancing makes sense.

Here are five scenarios to consider prior to refinancing:

1. The cost of mortgages has decreased

Homeowners’ mortgage rates are subject to change due to a number of circumstances, such as changes in the federal monetary policy, market fluctuations, inflation, the state of the economy, and international events. If mortgage rates fall, you may be able to save money by getting a lower interest rate than you currently have on your loan.

The typical rule of thumb is to refinance if the new rate is 1% to 2% lower than the current rate. When considering refinancing, make sure to analyze your current loan term. Calculate your break-even point and compare the whole costs of your current and new mortgages, including total interest.

2. You want a shorter loan term

If you want to pay off your debt quickly, consider refinancing your mortgage to a shorter loan term. You could increase your savings if you can get a cheaper interest rate and shorten your term. A shorter loan period implies you’ll pay less overall interest.

But stay informed, you will most likely be increasing your monthly payment in exchange, so make sure it fits into your budget. You don’t want to default on your debt.

3. Your home’s worth has increased

If the value of your property has increased, you may profit from refinancing, particularly if you have other high-interest debt to pay off or another financial goal. A cash-out refinance allows you to take up a new mortgage that is larger than the amount you owing on your original mortgage and receive the difference in cash. A cash-out refinance is an option to a home equity loan.

You might also use a cash-out refinance to make home modifications or pay for a child’s schooling. However, you must ensure that you do not wind up paying more in mortgage interest than you would on any obligation for which you are using the funds to repay.

4. You want to change from an adjustable to fixed rate

If mortgage rates are rising and you currently have an ARM (or adjustable rate mortgage), you may consider refinancing and switching to a fixed-rate mortgage. That’s because with an ARM, your rate may rise over what you’d pay with a fixed-rate mortgage.

If you are concerned about future interest rate increases, a fixed-rate mortgage may bring some relief.

So, these were some scenarios that points for getting your existing mortgage refinanced for a better interest rate and more savings. If you are looking for a reliable mortgage broker in Surrey, who can help you with mortgage refinancing, Satbir Bhullar is the name to trust. For more details, give me a call today.