Buying a home also entails looking for the right loan. But when financial circumstances arise, should one immediately consider mortgage refinancing? Or would it be more practical to stick to the original deal? Insurance agencies in Salt Lake City such as Altius Mortgage Group can help you decide whether or not mortgage refinancing is the solution based on your financial status.
Know the reasons why people opt to refinance and know the things to consider before making the shift.
Two common reasons why people refinance
There are generally two reasons why people opt to refinance their mortgages. First is to shorten the loan’s term and second is to secure lower interest rates. There are also other reasons why people refinance; to change between adjustable rate and convertible rate, as well as to tap equity or consolidate debt.
Opting to shorten the term of your loan would mean increasing your monthly payment, but this would also mean saving up on the total interests you need to pay. Refinancing to reduce the interest rate, on the other hand, would mean having reduced monthly payments based on your convenient timeline. A 1% reduction of interest rate is considered a good deal.
Things to consider
Being aware of your existing financial status is very important in decision making. Remember, should you decide to refinance, as much as 3-6% can be added to your loan interest due to points and fees. Depending on the circumstances, penalties are also involved. Aside from considering additional costs, it would be practical to compute your current mortgage loan and compare it to the new one. Be realistic. Will your family be able to live with additional expense because of refinancing?
Lastly, know your vision for the future. If you can see yourself retiring at that exact same property, refinancing MAY be a good choice. But if it is only meant to cover your heads for 5 or so years, then you might want to consider.
Having a general overview of how refinancing work can help you evaluate your own situation. Consult with your insurance agent to know more about the ins and outs refinancing your mortgage.