A home is the biggest purchase most people ever make, and ultimately paying off the mortgage becomes most homeowners’ primarily monthly expense. Refinancing then turns out to be an option many people consider. But is it the right thing to do?
Home mortgage refinancing can look appealing to homeowners looking to cut that monthly bill or for those that are afraid interest rates are heading up and it’s their last chance to grab a better deal, among other things.
Refinancing your mortgage means you replace your existing mortgage with a new one. Your new loan pays off the old one, and you start making payments to the new lender. However, before you start shopping around for the best rates, it’s crucial to remember that refinancing isn’t free
It may seem that now is a good time to refinance your mortgage. For instance, mortgage rates are still historically low, and you may have plenty of loan options. Average rates for a 30-year mortgage peaked at 4.94% around November of 2018, and have since dropped to an average of 3.81% today.
Lower interest rates and smaller monthly payments may encourage people to refinance at first glance. Nonetheless, all comes down to each individual situation, as refinancing can either save you money or cause a variety of problems
“There are different reasons to refinance: to reduce your monthly mortgage payment, to cash out equity, or to save on the overall interest you will pay on your house in the long run,” says William Ledesma, Senior Loan Officer at PRMG mortgage corporation. “However, each inquiry is individual as each person has an individual situation,” he adds.
If you’re considering refinancing your home, your first step should be to figure out if it will actually save you money. Most people think that if the rate is lower, they should automatically refinance. “Remember, along with that lower payment comes another 30 years (if refinancing in that term) of paying off that loan, potentially increasing the overall amount of interest you’ll pay over the life of the loan,” says Ledesma.
Be aware that refinancing a home loan costs money. You typically pay fees to your new lender to compensate them for offering the loan. You may pay a variety of charges for legal documents and filings, credit checks, appraisals, and so forth.
“Not every situation is perfect for everyone. Each case is different. People should consult experts to figure out if it’s worth taking the risks,” adds William Ledesma. “We can advise if it is convenient to extend a loan’s term, to get cash-out, or to lower the monthly payment, and so on,” he concludes.
For more information call 786-517-4600, or visit www.williamledesma.com
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