Home ownership for many is a vital part of achieving their part of the American Dream. I can understand as a home can feel like something you’ve worked hard for and will hopefully be a source of improving net worth as well as a place to build lifelong memories. With interest rates being at historic lows, this has allowed more families to possibly realize that dream and move into a house. It has also brought a steady rise in mortgage refinancing for those looking to make their mortgage payments go further. To be honest, it makes sense as refinancing your mortgage can potentially save you tens of thousands of dollars over the life of the mortgage.
Refinancing Your Mortgage Has Some Great Benefits
There are many benefits to be had from refinancing your mortgage, of most importance in that is lower the amount of interest you have to pay over the life of the mortgage. My wife and I were told when we bought our first house to pay no attention to the final dollar amount as we were told we’d never be in the house for the duration. But, how can one really know? That number was staggering to look at and that is why refinancing your mortgage can be a helpful tool. In addition to the possible interest savings, refinancing your mortgage also gives you the opportunity to shorten the length of your mortgage. Many people will blindly take a 30-year mortgage as that has been the norm of the industry and provides the best payment option for their budget. But, by opting to choose the 15-year option at refinancing you can cut the interest over the life of the mortgage and even better, own your house outright in half the time.
As with anything money-related, refinancing your mortgage does have its own set of issues that don’t make it attractive to all. The major drawback to refinancing your mortgage is the costs associated with doing so. Speaking from experience, refinancing can cost several thousand dollars. If you’re looking to move within a few years, then it might not make sense for you as you would not breakeven on the costs. Have you been living in your house for a long time? Then, refinancing your mortgage might not make sense as it would reduce the amount of your payment going to principle.
How to Know if Refinancing Your Mortgage is Right For You
When making a financial decision, it makes sense to let the numbers do the talking. That can help make a difficult decision easier and allow you to separate your emotions from your decision. When it comes to refinancing your mortgage, a bank loan calculator is an important tool to use as you can punch in your numbers and see what option is best for you and your family. The decision regarding refinancing your mortgage is not an easy one; it takes time and should only be made based off of your specific situation.
Have you ever refinanced a mortgage? Are the current low rates encouraging you to look at refinancing your mortgage?
Image by whitebuffalobk / flickr – Promotional consideration received for some post content
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