1. What do you stand to save by refinancing?
- There are two big reasons to refinance: To reduce your monthly mortgage payment or; To save on the overall interest you will pay on your house in the long run.
- A loan officer or mortgage broker can help you run scenarios that show you the cost and potential savings of refinancing.
2. How long will you keep your home?
- In most cases, it only makes sense to refinance if you plan on staying in your home for several more years.
- If you may sell the property soon, don’t refinance.
- Most refinances take between several months and several years to break even and begin saving you money.
- Your loan officer or mortgage broker can help you determine when you’ll break even.
3. Will you — and your home — qualify to refinance?
- Your ability to refinance depends on several factors...
- The amount of equity you have in your house
- Your income
- Your credit
- The bank needs to see that the home is worth more than the loan value, that you earn enough to afford the monthly payments, and that you are creditworthy.
Every situation is different, but you can consider refinancing your mortgage if:
- Current interest rates are at least 1 percent lower than your existing rate.
- You plan on staying in your home for another 5 years (give or take).
- You anticipate being approved for the refinance loan.
