4 Things to Consider if you’re Looking to Refinance Your Mortgage
Over the last couple of months we've had several past clients, friends, and family members reach out to ask the same question, "Should I refinance?" While much depends on your personal financial goals and objectives, there are four questions that might provide some guidance:
Are you planning to stay in your home for more than 5 years?
When you refinance your existing home, you will be readjusting your mortgage to a new interest rate and term. Due to closing costs there is a breakeven point that represents the amount of time it will take to build enough equity in your home to recoup those costs. For the average client and market, that breakeven point on refinancing is somewhere between 3-5 years. If homes in your area appreciate quickly, that number may be less. It’s important to consider how long you plan to stay in your home as you are evaluating refinancing your mortgage.
Would you like to pay off your mortgage early?
Refinancing from a 30-year loan to a 20- or 15-year term might be appealing if you’re interested in increasing your long term cash flow. Depending on your life situation, increasing your cash flow in the long term can be really attractive, even if it might mean paying a little more in the short term. If you’ve ever paid off your car note and kept driving the same vehicle, you know how satisfying this can be.
Plug in some numbers and see where you stand. Estimate monthly payments, evaluate interest rates and calculate down payments with this simple tool.
Would you like to eliminate debt and improve cash flow?
In certain situations debt consolidation can improve your household cash flow. Refinancing your mortgage may make sense in this scenario if it would help to strengthen your overall financial situation. Depending on the current interest rates and terms associated with your outstanding debt, refinancing may offer a more favorable outlook.
Do you know how your current loan fits in with your overall financial plans?
From tax benefits to building equity in an investment vehicle, owning your own home offers multiple financial and lifestyle benefits. In reality, everyone’s financial plans change over time. It’s important to take a step back and evaluate the larger financial picture to determine how your home factors into that plan. Every month that you make a mortgage payment is another month that you’re paying down what you owe on your home. Not only does this decrease the amount that you owe over time, but it also increases the amount of equity (or value) that you have in your home.
If you answered yes to any or all of these questions, then it is possible that a refinance of your mortgage is a good idea. If you're interested in a free assessment of your current mortgage and how it fits your financial goals please contact us. We're more than happy to help.
A Sente Loan Specialist will be happy to schedule a call to answer any questions you might have.