At some point, numerous homeowners ask themselves, “Should I refinance my mortgage?” And while some offers of lower interest rates and saving money may seem like refinancing is your best option, consider your unique financial situation before deciding.
You may be asking yourself, “where do I start in the process?” Here are three quick checklist items to help you get started on your refinancing journey:
Quicker mortgage payoff
If you’re setting out to pay down your mortgage loan faster than your original loan term, you may want to consider refinancing your mortgage.
For example, you closed on your home with a mortgage term of 30-years. However, your financial situation has changed, and you’re able to pay off more of your mortgage faster. You can opt to refinance your current mortgage loan for a shorter-term loan with a lower interest rate and pay more toward the principal of the loan itself.
Better interest rate and lower monthly payment
For those satisfied with their loan term, who just want a bit more on the monthly savings and better fixed interest rates, refinancing may be a great option for you.
Some mortgage lenders may allow you to refinance with them, especially if you’ve paid your monthly mortgage payment on time every month since your approval. Depending on your lender and their terms, you may be able to refinance your current mortgage for a better monthly payment with a lower interest rate and still maintain your loan term and schedule.
Your “break-even point” is calling to you
Before you decide to fully jump into refinancing for the better interest rates and lower monthly payments, find your break-even point. This is the point where your wallet starts to bulk up on savings over doling out for expenditures toward your mortgage payments.
For example, once you’ve calculated refinancing costs such as your bank costs, title and escrow fees, along with any other third-party expenses, you should have two numbers. One of those numbers is the amount you may be saving with refinancing and the cost to refinance. You’ll then want to divide the expected monthly savings into the overall cost to refinance.
Your equation may come out like this:
$5,000 (refinance costs) / $500 (savings) = 10 months before breaking even
In this scenario, you’d end up seeing savings around month 11. However, the break-even point will change based on your specific financial situation, lender terms and any other financial variables that may come into play.
Homeowners may refinance their homes for a variety of other reasons. Regardless, it’s always a good idea to make sure your finances will benefit from a home refinance. After all, it’s important to make sure this financial move benefits you and your household rather than hinder your financial health.
About the Author
Rudden|Bobruska Team
Gary Rudden, Lisa Rudden, and Nick Bobruska
RUDDEN BOBRUSKA TEAM
What sets your team apart from other real estate teams?
There is no team out in the market that offers what we do. All of us are Realtors, but
we each have specialized roles, which make our team so unique!
After decades of living and selling real estate in the DMV, we have established
ourselves as one of the top real estate teams with our market expertise and
cutting-edge technology. Our savvy high-tech marketing is on every website
and social media source. We have a huge network with other top agents, which
helps to premarket homes and discover homes for buyers before they reach the
open market. Our services include professional in-house staging services, broker
expertise in negotiating and navigating contracts, and buyer representation in all
price ranges. Each client has different needs and we create a marketing plan based
on those needs.
Our most distinct feature is our in-house construction and renovation team. We
are literally a full-service, one-stop shop when selling or buying a home!
How does the in-house construction and renovation team work?
All work is managed and completed through our licensed and bonded construction
crew. No need to call outside contractors. We are like “HGTV,” but we just don’t
have a show! Whether it’s a small makeover or a major renovation, we do it all. Our
sellers love this aspect of our team because we make preparing your home for the
market so seamless. Our buyers love the advice and insight we can give for future
renovations and repairs.
Having a licensed Maryland Home Improvement contractor as part of our team
along with the knowledge, experience, commitment and services that we offer, truly
puts our team as a vanguard in the real estate industry.