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When should I refinance my mortgage?

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Home Refinancing
There are many things to consider when refinancing your mortgage./ Getty Images

Mortgages When interest rates start to rise, many homeowners Who is wondering-should I refinance now. But before you call your mortgage lender, you need to consider whether it actually works better. There are many situations where refinancingcan save thousands of dollars and shorten the repayment timeline. However, refinancing may not be the best solution. 

Fortunately,there are several online tools available todayto help you calculate numbers. You will want to determine if your new potential monthly mortgage payments and refinancing of your mortgage will save you money in the long run.

I'm still not sure if this is the right time. Read below for a more complete breakdown of the process and when and shouldn't refinance your mortgage.

If you need to refinance your mortgage 

There are some obvious reasons for refinancing, basically a new one for your existing mortgage. Replace with. Perhaps you need a new loan term, you want to reduce your monthly payments, or you want to take advantage of a favorable mortgage refinancing rate. However, there are some other important factors to consider.

When weighing the pros and cons, you may first want to look at the interest rates on mortgages that may currently be eligible. This online marketplacecan display current rates including APR, monthly payments and other charges.

If you have been a homeowner for some time, you may not be in the same financial position as when you first took out your mortgage. Here are three scenarios where refinancing your mortgage is a good idea.

PMI can be removed

Private Mortgage Insurance (PMI)pays for traditional mortgages This is a required fee. Mortgage if your housing equity is less than 20%. If you pay a down payment of less than 20% of the purchase price, the lender will add PMI to your monthly payment.

PMI usually costs between 0.2% and 2% of the annual loan amount. If the value of your home is significantly appreciated, you may be able to remove the PMI by refinancing. This saves hundreds, and even thousands, of dollars each year.

Co-signer must be removed

When someone co-signs a loan, the loan will appear in the credit report and qualify for the loan It may affect your ability.   

If your co-signer asks you to remove them from your loan, you can do so by refinancing with a new mortgage. Depending on changes in market interest rates, you may not be eligible for the same low interest rates as when you first took out the loan. 

You have become a more desirable candidate

When applying for a mortgage, the lenderyour credit score Useand income to determine the eligible interest rate. If your credit score, income, or bothhas improvedsince you first applied, you may be able to get a much lower interest rate.

For example, if you had a credit score of 650 when you first applied and now have a credit score of 750, you will receive a better interest rate offer. 

Do you know your current credit score? If not, don't worry. There are online tools you can use to find your credit score almost instantlyGet started now.

If you shouldn't refinance your mortgage

Or there are many reasons to postpone your mortgage refinancing. The situation is different for each person. Therefore, before filling out the form, please check some of the main reasons why you may postpone refinancing.

I plan to move soon

When refinancing a mortgage, you will have to pay the closing fee, just as you did when you first took out the loan. Closing costs range from 3% to 6% of the loan amount. For example, the cost of closing a $ 200,000 mortgage can be between $ 6,000 and $ 12,000. 

In most cases, after refinancing, it may take about 5 years to reach the break-even point in closing costs. If you plan to move before that time frame, you should avoid refinancing. 

You will pay more for the total cost

When deciding whether to refinance, most people will pay the current interest rate and the whole Start by comparing market interest rates. However, you should also consider the total amount you will pay over the entire term of the loan.

For example, suppose you borrow a $ 200,000 30-year mortgage at a 5.5% interest rate. You took out this loan 10 years ago and are now eligible for a 30 year term at a 4.5% interest rate. If you refinance, your monthly payment will be reduced by $ 288. 

However, resuming the loan period effectively extends the loan period by 10 years, so you actually pay $ 30,870 more in total interest. 

You need to refinance your cash out.

Cashout refinancing is the refinancing of a mortgage to remove most of the excess. You can receive extra capital as cash. It can be used to pay for a child's college education, complete a home repair, or eliminate high-interest debt.

Cash out refinancing costs the same closing costs as traditional refinancing, so you need to be careful before applying. If you use cash-out refinancing for vacations, weddings, or luxury goods, these items can cost hundreds or thousands of interest in total in the long run.

Use cash out refinancing only if you are spending money to increase the value of your home, to repay your debt at a much higher interest rate, or to invest in another property Is the best. If not, you need to leave the house fair.

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