DJ Hassan’s Financially Fit Interview: The Truth About Refinancing Your Mortgage
You've probably heard that interest rates are really low right now, and that might have left you wondering if you could keep a little more money in your pocket each month by refinancing your home mortgage.
This week on Financially Fit, we talk with KeyBank Mortgage Loan Officer John Whiting about all the possibilities. You can listen to our whole conversation here:
If you've looked at your mortgage statement recently and wondered, "Should I refinance my home?" you're not alone. While there are clear advantages to refinancing your home mortgage, it pays to know the details before making the leap. What happens when you refinance your home mortgage?
Basically, you're replacing your existing mortgage with an entirely new mortgage. Some common reasons why people refinance their home include: to shorten their loan repayment term, lower their monthly payment, consolidate debt, or switch from an adjustable-rate mortgage to a fixed-rate mortgage, or vice versa.
What are the basic types of home mortgage refinancing?
One is rate-and-term. This allows you to refinance your existing mortgage balance in order to change the interest rate and/or term of the loan without advancing new money on the loan; the term is the number of years it will take to pay off your mortgage, assuming you always pay the amount due on time. A rate-and-term refinance differs from a cash-out refinance in which the new money is advanced.
With a cash-out refinance, homeowners with equity in their homes take out a new mortgage for more than their current loan's balance. From there, you'll receive the difference between your current mortgage balance and the new mortgage in cash.
If interest rates are lower now than when you bought your home, you could lower your monthly payment and potentially, overall interest paid by refinancing.
If someone is interested in refinancing their current mortgage, what should they do?
The answer to this varies based on your unique situation. You will need to assess what your total costs are now compared to the costs and savings the home refinancing would yield. There are a lot of factors involved and it would be beneficial to consult with an experienced mortgage loan officer to better understand the best option for you.