What is the goal when I ask is it worth it to refinance?
When you ask yourself, “is it worth it to refinance?” you have to consider your individual situation and long term goals for your home ownership.
When you are considering if is it worth it to refinance, there are several variables that will determine the best outcome for yours situation, including debt, how long you plan on living in your home, how much your home is worth, home repairs, and more.
The goal of refinancing your mortgage is to lower the monthly payment.
You want to achieve this for two reasons – first, so that the payment is not as much of a burden to you each month as you go to pay your mortgage, and second, so that you will save more money long-term by adjusting the costs in a way that will benefit you.
But make no mistake, refinancing does come with a potentially burdensome closing cost, so this is not a decision that can be made lightly.
So, is it worth it to refinance? Let’s look at your individual situation.
Is it worth it to refinance if I live in my dream home?
The answer to this question is likely yes.
One of the biggest and most burdensome mistakes people make when they consider is it worth it to refinance is refinancing a home they do not plan on living in for much more time. Part of the benefit that comes from refinancing when is it worth it to refinance your home is being able to pay less over a longer period of time.
While refinancing may get you out of the water on a month-by-month basis, if you plan on leaving soon after you consider if is it worth it to refinance, you could put yourself in a difficult situation because you will have money you have to recoup after refinancing.
However, if you are in a situation where you are absolutely positive you will be living in your home for a long time, the answer to the question is it worth it to refinance may be clearer to you because you will have more time to recoup the costs of refinancing. The thing that hurts most people asking if is it worth it to refinance is not realizing that they will have to recoup the closing costs of doing so.
Is it worth it to refinance if I owe a lot on my home?
The fact is, the economy has hit a lot of us very hard.
Maybe you are someone who was in their starter home – or so they thought – and now you find yourself clinging to every last paycheck as you pry it from your fingers to pay your mortgage and then eat Ramen for the rest of the month.
You may not be in the ideal refinancing situation of being in your dream home, but for you, the answer to the question of is it worth it to refinance may also be yes – especially if interest rates are particularly compelling, which is often the main reason people look to refinancing in the first place.
If you owe a lot on your home and are scared of foreclosure, you may have to be realistic and realize that you will be in that home for a bit more time than originally planned.
The most important thing for you to do now is get you and your family out of the financial danger zone and refinance your home. Work towards getting those monthly payments covered now and plan on achieving your dream home just a little bit later –is it worth it to refinance? Yes.
When you find you can barely feed your family, be glad for the roof over your head and commit to this difficult decision.
What should I consider as I ask, is it worth it to refinance?
One reason people often look to refinance their mortgage is to change the term of their mortgage.
15 year mortgages often come with a lower interest rate than 30 year mortgages with a higher monthly payment. Some people eventually find themselves in a situation where they can pay more toward that payment and seek a way to reduce their interest rate for that reason.
Another option in this situation is to pay more than your monthly payment without refinancing.
Sometimes when you wonder is it worth it to refinance, it is just not compelling enough to go full monty into mortgage refinancing. You do not have to take the full step into refinancing and can instead go this route on your monthly payments.
Refinancing for home equity
Some people choose to refinance because the size of their home equity would give them a cash payment after doing so. If you feel that the benefit of having some of your home equity in hand is greater than the risks of refinancing, this is an option of keeping yourself afloat instead of wondering if it is worth it to go through all the motions.
When Should I Not Consider Refinancing My Mortgage?
Long-term mortgages are generally a bad situation to refinance because you are nearly done paying off your mortgage and refinancing could set you back significantly.
Do not make this mistake if you can avoid it and instead do everything you can to cut costs in the last leg of your mortgage.
Another situation where refinancing should be avoided is if you are certain you want to move in the short-term. If your home is undesirable because of quality or location, try to avoid refinancing and look into lines of credit if you need short-term financial assistance.