Last Updated on
In this article I am going to be quick and to the point. I will give you a few ideas of why to refinance other than lower your interest rate, but first I want to give you an example of when lowering your rate may not be the best idea.
Say for instance you purchased your home 6 years ago at 6% and you bought the home for 100000 dollars. If you refinanced today for the same amount at 4.875% your payment would be 529.21 and your current payment is 599.55. Lets round up and say a saving of 71 dollars a month for 360 months. That is a total savings of 25560, but remember you have been making the 599.95 payment for 6 years. So you have paid into your current mortgage 43200 dollars. You would be losing about 18000 dollars in this transaction. This is why it is important to have a professional mortgage broker or loan officer and not someone who is new to the business.
Here are some reasons to refinance other than getting a lower rate.
1) Higher tax deduction for your federal taxes.
2) Possibly get cash back.
3) Consolidate bills to save money monthly.
4) Reduce your term and look at a Bi-Weekly option to save money long term.
5) If you have a bigger size loan lowering your rate could save you money substantially. Also look at possibly reducing your term to see if you can keep your payments the same but build equity a lot quicker.
These are just a few of the reasons to refinance. When looking don't forget find a professional who knows exactly what he or she is talking about and make sure it makes sense using math and logic!