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Source: CBS News —
When you first bought your home, there’s a good chance you took out a long mortgage, like a 30-year fixed-rate loan. While that might have felt like almost a lifelong decision, the reality is that homeowners can often change their mortgages by refinancing.
With mortgage refinancing, you can take out a new loan to cover your old one, so you essentially switch from the terms of your old mortgage to those of the new loan. If interest rates dropped, for example, you might be able to refinance so that you have a mortgage that reflects those lower rates. Or, you might refinance to a 15-year term instead of a 30-year one, for instance.
If you think you could benefit from refinancing then answer a few quick questions here to see what kind of interest rate you’re eligible for.
3 smart times to refinance your mortgage
While refinancing may not always make sense there can be many scenarios where you come out ahead. Accordingly, it could be worth considering refinancing when:
When you can get a significantly lower interest rate
If you can get a mortgage refi rate that’s significantly lower than your current mortgage rate, then you could save money by lowering your monthly payments and reducing your overall interest payments. However, mortgage refinancing comes with average closing costs of around $5,000, according to Freddie Mac.
You can use the below mortgage amortization calculator online to see how differences in interest rates affect your mortgage payments. That way, you can see if the long-term savings of a lower interest rate outweigh closing costs.
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