James V. Hecker

Santa Clarita California

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Mortgage Refinancing: How to Ensure a ‘Re-Fi’ Makes the Most Sense for Your Financial Situation

February 12, 2015 by James Hecker

Mortgage Refinancing: How to Ensure a 'Re-Fi' Makes the Most Sense for Your Financial SituationRefinancing your mortgage can make good financial sense, as long as you are doing it for the right reasons. Before considering a refinance, it’s worth spending some time to assess what your financial goals are.

Lowering Your Interest Rate

One of the most common reasons to refinance a mortgage is to take advantage of a lower interest rate. Because mortgages are long-term loans, even a slight drop in the interest rate on the loan can make thousands or even tens of thousands of dollars of difference over the life of the loan.

Before refinancing to get a lower rate, you’ll want to ensure that you will stay in your house long enough to reap the benefit of the lower payment. For example, if your refinance is going to save you $50 a month and your closing costs are $3,000, you would need to stay in your home at least five years just to break even.

A Shorter Loan Term

Another common reason people refinance their mortgage is to shorten the term of the loan. Though a 30-year loan gets you a much lower monthly payment, you wind up paying much more in interest over the term of the loan. If interest rates drop significantly, you might be able to refinance into a 15-year loan and only pay a couple hundred dollars more a month, which, if you can afford it, will mean you pay off your house much faster and pay significantly less in finance charges.

Moving From A Variable To Fixed Interest Rate

If you got a loan with a variable interest rate, you likely will want to refinance at some point into a fixed-rate loan. When you do so, however, you want to make sure you are getting a better deal. If interest rates look like they are going to increase, that would be a good reason to move to a fixed-rate loan.

Getting Rid Of Mortgage Insurance

If you put down less than 20 percent of the purchase price of your home, you likely had to get mortgage insurance. Depending on the insurance policy and how quickly your home appreciates in value, it might be beneficial to refinance at some point if you have enough equity in your home to drop the mortgage insurance.

If you think the time is right to consider refinancing your mortgage, contact your trusted mortgage professional to get more information.

Filed Under: Home Mortgage Tips Tagged With: Home Mortgage Tips, Mortgage Refinancing, Mortgages

James Hecker

Contact James

Focus Lending Group, Inc.
BRE #00902195 • NMLS #214601
CALL 661.295.7030
FAX: 661.244.4932
james@james4loans.com


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