Whenever interest rates drop, the appeal of refinancing your mortgage grows. But it's important to know the real costs — and potential savings — before making a move. There are some situations when refinancing your home loan definitely makes sense, yet there are several factors to consider before deciding if it’s right for you.
Refinancing your mortgage is, in effect, replacing your current home loan with a new one. Common motivations for refinancing include the opportunity to borrow at a lower interest rate, to reduce monthly payments, to pay a loan off more quickly or to change to a different type of mortgage loan (i.e. switching from an adjustable rate to a fixed rate).
If you have equity in your home, refinancing might also give you cash in exchange for the equity you’ve built up in your property.
But it’s important to evaluate your overall financial situation, how much equity you have, how long you plan to stay in the home and whether closing costs and other mortgage transaction fees will offset any savings from a lower rate.
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TCU offers tools to help you make an informed decision. TCU’s “Should I Refinance” Calculator takes into account how much you owe on your home, along with interest rates and loan terms.
It also determines how long it will take to break even on closing costs with a new mortgage payment. TCU’s Mortgage Refinance Calculator factors in your current interest rate, the potential new rate, closing costs and how long you plan to stay in your home.
Our Homebuying Tips article also provides additional insight that can benefit existing homeowners as they consider refinancing.
With rates at all-time lows, many homeowners could benefit from refinancing, so it’s worth doing your homework to see if you could qualify for a home loan that would save you money.
Contact a TCU Mortgage Professional to find out if refinancing is right for you.
This article is for educational purposes only and doesn’t constitute tax, legal or accounting advice. No material here is a recommendation to purchase or refinance a house or constitutes a loan approval. Please consult with an attorney or tax professional for guidance.