Should You bRefinance Your Mortgage/b? | Mortgage Interest Rate
With interest rates near all time lows, many people are refinancing their mortgages. Chances are one of your friends or family members has recently refinanced and reduced their monthly mortgage payment. Refinancing a mortgage is simply taking out a new loan with different terms – hopefully more favorable ones. Because your new loan will have a lower interest rate and different terms, your mortgage payments could be considerably lower. In addition to having lower mortgage payments, you will have the opportunity to change the type of mortgage you have. You may also wish to change the length of your mortgage from 15 to 30 years, or vice versa.
Perhaps now you have a better credit rating than when you took out your original mortgage, which will allow you to get better terms this time around. Your credit history will also have an effect on your mortgage interest rate . Refinancing will allow you to build equity in you home more quickly, and you will also be taking advantage of the equity you have already built. If you previously mortgaged $100,000, and you currently have a payoff balance of $70,000, refinancing could dramatically lower your monthly mortgage payment.
Before you decide to proceed with refinancing your mortgage, there a few things you should consider:
How much longer do you anticipate living in your present home? – If you will be living in your home for at least two or three more years, you should be able to overcome the costs of refinancing by lowering your mortgage interest rate . If your move will be sooner, you may find that the cost of refinancing will outweigh the potential savings from the new, lower interest rate.
If your goal in refinancing your mortgage is to build equity in your home, you might want to consider changing the length of your mortgage. By changing from a standard 30 year mortgage to a 10 or 15 year mortgage, you will build equity much more quickly. Applying additional payments toward the principal will also allow you to build home equity at an accelerated rate.
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