Broker Check
 

Is Refinancing Really a Good Idea?

| July 14, 2017
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I get asked all the time, “Is refinancing really a good idea?”  If you have been wondering this yourself, it’s time for a “Mortgage Check Up".  For some this may seem overwhelming as you remember back to the loan process.  Taking the time to gather anything involving a new mortgage seems like too much work, and it might be easier to stay put and get on with the other important things in life.  If you have had a bad experience, it’s not necessarily the bank with the issues, it could be the delivery of the Loan Officer.  It is very important to chose your Loan Officer wisely and read any reviews you can find on them.  

There are many reasons refinancing can be a beneficial and smart move, and many of them come directly from looking at current interest rates. Refinancing is a great way to potentially lower your current interest rate (and payment). If you’re planning on staying in your home for a few more years, refinancing could save you in the long run.

Now Is the Time

Interest rates are still not far from recent all-time lows, which means that now is the time to see if there’s an opportunity to decrease your interest rate. Mortgage rates constantly fluctuate, so ask your mortgage consultant whether now is a good time to refinance.

In the long run, making the effort to fill out some paperwork and go through the loan process could potentially save you thousands of dollars in interest.

The Benefits

Refinancing may significantly reduce the amount of your payments. Reducing your payment amount can save thousands over the period of the of the loan and up to hundreds per month. For example, a $250,000 loan at 6.5% would equate to a monthly payment of $1,580.17. The same loan at 4.5% would equate to a monthly payment of $1,266.71. This money can be saved, invested or used in a way that best fits your situation.

Your Options

Instead of lowering your payment, you may want to consider shortening the term of your loan. Switching from a 30-year loan to a 15-year loan may be a better option for some. As interest rates have decreased, 15-year mortgage payments may not be that much more expensive than 30-year mortgage payments. Being able to pay a little more per month could a better option than paying more on interest over a longer period of time. Switching from an adjustable rate to a fixed rate is a possible choice as well.

Things to Consider

As there are reasons for refinancing, there also exist reasons to avoid it. Refinancing to a loan with a lower interest rate can lower the amount you are paying each month, but looking at the overall cost is very important. You may extend the loan beyond what is necessary and end up paying more in interest. Other potential problems to be aware of are the costs associated with refinancing.

Consolidating debt can be a risky move for homeowners. It can make sense paying off high-interest debt with a low-interest loan. Doing this changes non-collateral risk, such as credit card debt to debt that is backed by your home. The total amount paid is likely to be dramatically higher due to the increased length of the loan.

These and many other factors should be considered during the "Mortgage Check Up" process and see if refinancing would be a wise move.

About Lisa Sinner

Lisa has been a Loan Officer since 2002. Lisa is a fully licensed Loan Officer and gives personal attention to anyone who wants to purchase a new home, refinance to lower their current interest rate, cash in on some home equity or refinance out of an FHA loan into a Conventional loan to eliminate mortgage insurance. Lisa can be reached at lisasinner@axiomfinancial.com or 720-329-7101.

Please be advised there is no obligation to use this service and Lisa Sinner is not affiliated with LPL Financial or Varra Financial Associates.

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These articles are historical and based on information that was current at the time of initial print. They contain information that may have or has changed. Information including staff and business names may have changed and we now offer access to securities through LPL Financial. Investment markets have changed and retirement plan rules have changed, in addition to other content that may have changed. Varra Financial Associates has transferred its assets to LPL Financial.

The opinions voiced in this article are for general information only. They are not intended to provide specific advice or recommendations for any individual and do not constitute an endorsement by NPC. To determine which investments may be appropriate for you, consult with your financial professional. Please remember that investment decisions should be based on an individual's goals, time horizon, and tolerance for risk. Varra Financial Associates and Axiom Financial are separate and unrelated companies. NPC does not render tax or legal advice.

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