As interest rates go up and down, an important question comes to mind: When, if ever, should you refinance your home?
The most common reason to refinance a home is because rates have gone down from when you initially bought your home. Lower interest rates are why we refinance any type of loan, whether it’s a mortgage, student, or credit loan. GMFS Mortgage offers four different benefits to refinancing your current mortgage.
Lowering Monthly Payments may be the sole reason you choose to refinance your mortgage. If this is the case, GMFS Mortgage can help you determine when is the best time if to refinance your mortgage that will ensure long term savings as well as monthly savings!
Paying Off Consumer Debt, such as credit cards, short-term loans, bank loans, or other debt, is also a refinancing option available to those who meet the necessary qualifications. With a low interest rate, you will save money in the long-term on all of your debt by paying them off with a “cashout” refinance option.
Combining Your Monthly Payments of two mortgages at a lower rate than the average rate of the two payments can save you money in the long-term. A GMFS Mortgage loan officer can calculate your break-even point and determine the point at which the mortgage refinance will pay for itself. This will give you a great vantage point from which to determine whether or not this option is best for you!
Changing your Current Loan Terms is the final option GMFS Mortgage has available for refinancing a mortgage. Most homeowners that choose this option do so to ease the burden of making payments on their current 15-year mortgage loan to a 30-year mortgage. By doing so, they stretch out the loan term, essentially reducing their monthly payments. However, on the opposite side of the spectrum, some find themselves in a position to pay off their mortgage faster than initially anticipated. In these cases, GMFS Mortgage assists in changing a 30-year mortgage to a 15-year mortgage.
But how low should rates be to justify refinancing your own home? To decide whether a mortgage refinance is the right option for you, a GMFS Mortgage loan officer will assist you in calculating your break-even point: At what point in time will it take the mortgage refinance to pay for itself, and ultimately save you money? As you and your loan officer determine whether your reasons are enough to justify a refinance, keep in mind the following:
- Though interest rates may be lower than when you financed your home, predicting future interest rates is foolish. While it seems as though the rates are steadily climbing, whether to refinance a mortgage based on the current rates is not a prediction of the interest rates to come. Get with your loan officer to determine when the best time is for you.
- When you refinance your mortgage, you’re restarting the clock. For instance, if you have 15 years left on your mortgage and refinance back to a 30-year mortgage, the extended term will lower your monthly payment. However, you are extending the time in which you will pay back your mortgage, again. Essentially costing you more in interest in the long-term. How much you save each month on your loan is simply a function of refinancing a mortgage.
- We only like to think about taxes once a year, and that should be enough, right!? Wrong. When refinancing a mortgage, it’s important to factor in the tax consequences of a refinance. By lowering your interest rate, you are saving money on your monthly payments. However, once you adjust the monthly payments with lower interest, you will receive a smaller tax deduction. Though it may not seem like much at first, it will make a larger difference come time for tax season.
There’s no perfect recipe to refinancing a mortgage. You will be adding years back onto your mortgage, but you’ll, hopefully, be saving money and/or increasing cash-flow. Understanding the pros and cons of refinancing for your personal situation is where GMFS Mortgage and your loan officer come in.
By refinancing your existing loan, your total finance charges may be higher over the life of the loan.
Get Started by visiting our Refinance page.