Refinancing Your Home

As a homeowner, you have a lot of expenses to balance. Renovations, utilities, property tax, and a plethora of other last minute expenses make budgeting and paying bills a difficult task at times. One of the biggest expenses any homeowner has to deal with for an extended period of time is paying off a mortgage.

A mortgage is money that you, a creditor, must pay back to a debtor within a certain amount of time in order to pay back the money loaned. This most particularly pertains to the loan homeowners take out in order to purchase a home, since most people cannot buy a home outright. This mortgage will have interest rates added to it, which are often the most difficult part to pay off as they continue to grow and grow. A mortgage is a very daunting thing for homeowners to have looming over them, but luckily it is not always fixed.

Have you ever heard of refinancing? When interest rates are low, some people choose to refinance their mortgage in order to reduce the interest rate that is being applied to their loan. This is in the hopes that it will be easier/faster to pay off.

Low interest rates often cause a frenzy in the market, because everyone wants to get rid of their mortgage as soon as possible. However, you need to seriously consider some things before you refinance your mortgage. Will you be selling soon? Are lower interest rates worth making payments for a longer period of time? Will you break even, or go into a deficit? Sometimes the stars align and you can refinance so that you pay less interest over a shorter period of time, but this is not always the case. Be cautious and consult with a professional.

So, when do you refinance? It is typically safe to refinance if:

-You can secure a low interest rate

-You can shorten the term of your loan

-You can move from a fixed-rate to an adjustable-rate mortgage, or vise-versa (depending on what is best for your debt)

-You can consolidate debt (get low-interest mortgage in order to put the saved money towards other high-interest debt)

All these things are fluid: sometimes they make refinancing worth it, sometimes they don’t. While we can say that for the most part they are good indicators that you should take advantage of low interest rates and refinance, every mortgage (and all of the factors going into it) is different. As we mentioned above, consult a professional who knows your case, market trends, and can give you an educated suggestion.

All that said, wisely look into your options!

Your Real Estate Professional,

Ken Richter

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