Mortgage Refinance

For most people with home mortgages, refinancing can be a great option. Refinancing allows you save money on your monthly payment, reduce your interest rate, reduce the term of your loan, and/or take extra money out for other expenses. Keeping a close eye on mortgage interest rates can be a great way to save thousands of dollars over the life of your loan.

For many people refinancing is a very straightforward process. With a simple visit to a bank, or a local loan broker you can get the process started. They can help you understand your options, and learn what you are trying to accomplish with your refinance. For most refinances, the most common scenario is probably trying to get a better interest rate, which can save you money every month on your monthly mortgage payment, and can also save even more money for over the course of the loan. There are some costs associated with most refinances, that are about the same as a normal mortgage: closing costs, documentation fees, etc. You will want to make sure that the added cost of refinancing, will pay off depending on how long you plan to stay in your home. A few thousand dollars in closing costs will probably pay off if you can save $100-200 a monthly, as long as you plan on staying in your home for a few more years at least.

The savings can be tremendous. Lets say for example that you currently have a 30 year loan that was originally $200,000 at 5%, can was about $1,074 per month. For the first few years you probably will not have paid down the principal balance of the loan very much, so if you refinance you would probably need to refinance almost $200,000 again. If you can drop your interest rate to 4%, you could save over $118 per month, or $1,416 per year. For closing costs of a few thousand dollars, you should be able to break even with about 2 years. The real exiting part is the savings over the life of the loan, you could save over $42,000 in interest over the life of you loan.

Some mortgage companies also offer streamlined refinances. These options can allow you to refinance with little or no expense out of pocket. They generally result in slightly higher interest rates, but they can be a quick and easy way to save some money, without having to fork over the money upfront for a refinance.