Refinancing your home mortgage is the wise choice for many homeowners. Refinancing can save you thousands of dollars over time, and also help you to reduce your monthly payments. It is a popular option that people choose when they are looking to save money on their long-term financial plan. To find out how much refinancing could save you, read on!
In this article
What is refinancing and what are the benefits?
Refinancing is when you decide to switch out your current mortgage with a new one. This is different from refinancing your home equity loan or line of credit (HELOC) because refinancing mortgages are often for lower rates, longer terms, and sometimes get rid of the fees that come along with them.
This method is really good if you are in need to save up some money. According to the home loan specialists at Lending Loop, refinancing can get you the best home loan deal to ensure you are on track to achieving your financial goals. That is why many people go for this option and they are all satisfied by the results.
The benefits of refinancing
There are many benefits to refinancing your home. You may be able to save a lot of money by refinancing into a new mortgage with a lower interest rate and smaller monthly payments. When refinancing, you can choose from several options for your new loan:
- Adjustable-Rate Mortgage (ARM)
- Fully Amortizing or Interest Only Loan
- Balloon Mortgage
- Hybrid Adjustable-Rate Mortgage (ARM)
- Fixed-Rate Mortgage (FRM)
- Jumbo Loan
These refinancing options can help you save money. You could lower your monthly payment, stretch out the term of the loan to reduce payments as well as shorten repayment time and take advantage of a low-interest-rate environment.
Some refinancing options offer lower interest rates but require you to pay off your loan in a short amount of time, while others have higher interest rates and longer repayment periods. Each option offers different benefits.
How to refinance your mortgage
In order to refinance a mortgage, you will need your original loan documents and a refinancing application. With this process, there may be an adjustment to the interest rate. This means that it is possible for your monthly payment to change or stay exactly how it was before refinancing.
It's important when refinancing mortgages to consider what closing costs will go along with the refinance process. Closing costs are associated with buying any home so they can't all be avoided but some tips include using seller concessions if possible and making sure no money from the new property goes towards this cost as well as being aware of where fees might come from such as an appraisal or title insurance premiums in addition to things like credit reports, origination charge, etc.
How much can you save by refinancing?
You can save a significant amount of money refinancing your home. This is an especially good option if you are currently paying a high-interest rate on your mortgage since refinancing will reduce the monthly payment due to lower interest rates, or allow you to pay off more expensive debt with that same monthly payment.
If refinancing reduces your interest rate by even one percentage point it could save you hundreds of dollars per month and thousands over time! For example, refinancing from an eight percent APR (Annual Percentage Rate) down to four percent saves $200 in finance charges every month assuming the life of the loan does not change significantly. If this were also enough for two months' payments but on a 30-year fixed-rate plan at 25% down instead of 20%, refinancing would save you more than $45,000 in interest payments over the life of your loan.
As you can see, refinancing is one of the most beneficial things you can do. Make sure to have a good company do this for you and always see expert advice. Keep in mind that you have to work out the best deal for you alone. Good luck saving a fortune!