With interest rates at a 30-year low, now is the perfect time to refinance your home.
Many people are taking advantage of current low interest rates to refinance their existing home loan. Even if you’ve only owned your home for a few years, you may benefit from refinancing. All sorts of tips and advice on refinancing a home are available over the Internet. People refinance their homes for a variety of reasons including: to lower their monthly payment, to get a lower mortgage rate, to build equity quicker, and to shorten the length of a loan. Do a little research and find out if refinancing your home is right for you.
If you’re looking to lower your monthly payment, then get a new mortgage with a lower mortgage rate. The rule of thumb is that a mortgage rate that’s at least 2 percentage points lower than your existing home loan will generally save you money. Another way to lower your monthly payment is to switch from a 15 year to a 30-year mortgage. This could add a tremendous amount of additional interest throughout the life of your loan, but if you’re sure you’ll sell within the next 5 to 7 years then this may still be a good idea.
If you’d like to shorten the length of your home loan and don’t mind a slightly higher monthly payment, then look into a 15-year loan. A 15-year loan can save you tens if not hundreds of thousands of dollars in interest over a 30-year loan. If you can’t afford the higher payments on a 15-year mortgage, see if you can get your new loan’s term to match the years that are left on your old loan. For example, if you’ve owned your home for 5 years then your 30-year mortgage could be transformed into a 25-year loan. This small step could help you build equity quicker with out raising your monthly payment too much.
If you’re thinking about refinancing your home but aren’t sure you can spring for the up front costs of taking out a new mortgage, don’t worry. Many companies have introduced no cost or low cost financing packages that minimize out of pocket expenses. You may have to settle for a slightly higher interest rate but could still save money in the long run. If you want to lowest possible rate available, you will likely have to pay loan origination fees – but they can be added on to the principal of the loan.
With today’s low interest rates, almost everyone can benefit from refinancing their home. Even if you refinanced you home a year ago, you may still be able to save.