How Do You Know It’s the Right Time to Refinance?
Refinancing a home loan — AKA, taking out a new home loan to replace your current one — can be either a really great idea or a not-so-great one. The key? To only refinance your loan if it will really, truly benefit your financial health and situation in the long-term (not just the short one). If you’re wondering if it’s the right time to refinance, we have you covered.
To put it simply, it’s the right time to refinance your home loan if you can do one of the following: shorten your mortgage term, snag a lower interest rate, or save a good amount of money in your monthly budget.
Here’s what you need to know.
You want to shorten the term of your mortgage.
Often, a refinance can be a great idea to shorten your mortgage term. For instance, maybe you initially took out your mortgage at a length of 30 years and want to make it a 15-year term instead! If you can refinance your loan in order to shorten your mortgage term, you may be able to save thousands (if not more) of dollars in interest and pay off your mortgage significantly more quickly.
Side note: often, refinancing can also allow you to lengthen the term of your mortgage. However, we’d recommend against that unless you have no other option. Refinancing to lengthen your mortgage will really increase the amount of money you pay in interest — which is most definitely something you should consider!
You can get a lower interest rate.
One of the biggest benefits of refinancing your home loan is the ability to get a lower interest rate, which can save you a lot of money. You also may have taken out your home loan with a variable interest rate, and may be able to refinance your mortgage to a fixed interest rate. If you’re able to refinance your loan to lower or fix your interest rate, it’s likely a great idea.
You can free a significant portion of your monthly budget.
A mortgage payment can be a huge financial drain, whether it’s on an investment property or for your current home. Monthly mortgage payments can be steep, and getting them lower with refinancing can be a really helpful process. Now, there is a balance to strike here. You don’t want to refinance your mortgage in a way that will significantly lengthen your mortgage or add interest to your loan. However, if you need to free up some room in your budget, a refinance may be a decent option.
Do you need help refinancing your mortgage or digging into your home loan options? Our team at VRM Lending is here to help. Find out more here.