Low-interest rates have many homeowners wondering if it’s a good time to refinance. Refinancing can save you a lot of money in the long term when done correctly. It’s important to consider the drawbacks as well. Here are some reasons why you might want to refinance, and a few things to be cautious of.
Reasons you may want to refinance:
If you have extra cash on hand to make larger monthly payments, it may make sense to change to a 15-year mortgage so you can pay it off earlier.
Be careful when borrowing against your home. If the cash you take out goes to increasing your debt rather than resolving it, then you could end up putting your home in jeopardy.
Don’t forget about the closing costs involved in refinancing. You will have fees associated with your new loan just like you did when you purchased your home, so remember to figure the closing costs when you do the math.
Also, be cautious about extending your loan term. If you refinance with a 30-year mortgage when you are 10-15 years or more into your current mortgage, you’ll end up paying way more in interest overall, and have extended your payments for many more years.
Of course, a mortgage lender is the best resource for answering your financing questions. If you need someone to talk to further, your Raveis Elite Realtor is happy to give you a referral.
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