If you've been in your home for awhile, you may be starting to wonder "when is it worth it to refinance your mortgage?"
Are you paying too much or not enough every month?
Are interest rates going up or down?
How much equity do you have in your home?
The answers to all of these questions are just small pieces of the larger question of: should you refinance?
1: Are Interest Rates Lower?
If the current market interest rates are lower by two points or more than that of your home mortgage, then you should seriously consider refinancing. An online loan calculator can help you determine how much you would save in interest over the life of your loan in interest.
2: Do You Have an ARM (Adjustable Rate Mortgage)?
Getting rid of that adjustable rate mortgage is a great reason to refinance to a lower, fixed-rate home loan that can save you a lot of money over the life of your loan and keep your payments steady.
3: Eliminate your PMI (Property Mortgage Insurance)?
If you put less than 20% down on your home, then you most likely had PMI added to your mortgage payments, and if you have over 20% equity in your home now, then you no longer have to pay that and refinancing can get rid of it. PMI insurance is based on the value of your home but can be anywhere from $75 to $150 a month.
4: Want to Improve Your Credit Score?
If a high mortgage payment every month is taking up a good chunk of your income, then lowering that payment by refinancing can lower your debt to income ratio and improve your credit.
5: Need to pay for a large, one-time expense or consolidate your debt?
If credit cards, medical bills or tuition, even home improvements or repairs are looming, then getting a cash out refinance may be in order to help you pay for those without having to take out a separate loan.
6: Can you afford more?
If your financial situation has changed and you can afford a higher monthly payment, you may want to refinance to a shorter-term loan to get your home paid off sooner.
There are many situations when it is worth it to refinance your home mortgage, but talking to a home refinance specialist is the best way to go. They can analyze your situation and provide you with information and tools to help you make a sound decision that will be to your greatest benefit.