Refinancing your mortgage can be a smart financial move to help save money, shorten your repayment terms, and establish predictable monthly payments. If you're wondering if it's time to refinance your mortgage, there are several key factors to take into consideration.
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Benefits of Refinancing Your Mortgage
First, it's important to understand why it could be beneficial to refinance your mortgage. By refinancing your mortgage with Geddes Federal, you could benefit from:
- Lower interest rate
- Lower monthly payment
- Shortening the length of your loan term (such as a 30-year loan to a 15-year loan)
- Changing your loan from an adjustable rate mortgage to a predictable, fixed-rate mortgage
- Tapping into your home's equity with cash-out refinancing to handle home improvements, debt consolidation, or other large expenses
Should You Refinance Your Mortgage?
Mortgage refinancing is a good idea for most borrowers if you can lower your interest rate and have plans to stay in the same home long enough to recoup closing costs associated with refinancing.
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When Should You Refinance Your Mortgage?
Once you've decided it's worth refinancing your mortgage, it's time to consider when you should refinance your mortgage. The best time to refinance can involve several factors, including:
- Interest rates: A significant drop in interest rates can make refinancing a wise financial move in order to save money on your monthly mortgage payments.
- Credit score: If your credit score has improved since your loan was originated, you could qualify for a lower interest rate.
- Financial situation: If your income and/or job stability has improved since your initial mortgage, you could qualify for a shorter loan term to pay off your mortgage sooner.
- Homeownership plans: If you plan to stay in your home for a long period of time, refinancing could be a worthwhile investment that could lead to substantial savings over time.
Overall, if you're able to obtain a lower mortgage rate and plan on staying in your home long enough to reap the benefits of a lower interest rate, refinancing your mortgage could be right for you.
When Should You Not Refinance Your Mortgage?
There are some instances where it may not make sense to refinance your mortgage, including:
- Lower credit score: If your credit score has decreased since your initial mortgage, it may be difficult to get a lower interest rate for your refinance.
- Short-term homeownership: If you plan to sell your home in the near future, refinancing closing costs may outweigh the potential savings of refinancing.
- Recent refinancing: If you've already refinanced your mortgage recently, it's generally not wise to refinance again too soon.
- Financial instability: If you're facing financial difficulties or uncertainty with your job situation, refinancing may not be the best solution.
- Discretionary spending: If you're refinancing with the intent of using the cash-out to make one-time discretionary purchases like a new car or a vacation, you may want to consider alternative solutions. Generally, opening a savings account is a better route to save for such expenditures.
How Much Can You Save by Refinancing?
Refinancing can provide significant savings on your monthly mortgage payment, especially over the long-term. To understand how much you can save by refinancing, you can determine a break-even point. This will represent how long it will take you to break even on your refinance, where you'll start to reap the benefits of refinancing after that point.
Refinancing closing costs vary based on several factors, but let's use $3,000 as an example. If refinancing will save you $200/month on your monthly mortgage payment, then you can take $3,000/$200=15 months to break even on your refinance. After you break even, you will start to benefit from the lower monthly mortgage payment you've obtained by refinancing.
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Get Lower Monthly Payments with Mortgage Refinancing
Mortgage refinancing can be a great financial move for people looking to save on their mortgage payments. By saving money with a lower mortgage payment, you can use that extra money to treat yourself or save more toward other financial goals.
Geddes Federal's friendly loan professionals are ready to assist you with any questions you may have about mortgage refinancing near Syracuse NY. Give us a call at (315) 468-6281 or stop by one of our branch locations today.