If you can save money over the term of your loan and take any stress out of paying your monthly debts because of a lower mortgage payment, then refinancing your home will make sense.
There are several ways to achieve these goals. Refinancing to lower your interest rate can save you thousands of dollars in interest over the life of your loan, provided the break-even point for the closing costs takes no more than two to three years.
Refinancing may be motivated by the desire to change your 30-year fixed rate loan to a lower-interest 15-year fixed rate loan where you will be saving thousands in interest over the shorter term.
Accessing equity is also a common reason to refinance, especially when there has been good appreciation. According to DS News, 74% of all refinances through the second quarter of 2022 were cash-out refinances. Even though you must preserve a minimum 20% equity position, a cash-out refinance probably remains the cheapest way to borrow money.
If you have an existing mortgage that requires a mortgage insurance premium (MIP) or private mortgage insurance (PMI) and your equity now exceeds 20% of the appraised value, it makes sense to refinance to a conventional loan to eliminate the extra monthly insurance obligation.
Adjustable-rate loans may adjust with higher interest rates after the initial fixed period, so the next logical step would be to refinance to a predictable fixed-rate mortgage, especially if you are planning to be in your home for several years.
While these reasons support why refinancing makes sense for you to save money and increase your monthly cash flow, you still need to weigh the cost to refinance your mortgage against how long you intend to stay in your home.
Call or email me, and I can evaluate your present loan and determine which refinancing options make sense for you.