Mortgage refinancing is the process of replacing your current mortgage loan with a new one. Typically, to obtain better loan conditions (i.e. lower interest rate, cash in equity, etc.). In the U.S.A. the average tenure of a 30 year loan is 12 years[1] making a loan refinance a common financial decision.
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Mortgage refinancing is the process of replacing your current mortgage loan with a new one. Typically, to obtain better loan conditions (i.e. lower interest rate, or a shorter loan term). Essentially, you're getting a new loan to pay off the old one. In the U.S.A. the average tenure of a 30 year loan is 12 years[1].
Yes, you can refinance your mortgage. Refinancing involves taking out a new mortgage loan to replace your existing one, typically to get a better interest rate, change your loan type, or access equity. It's a common way for homeowners to save money or make other financial changes related to their mortgage.
Refinancing your mortgage means getting a new mortgage loan to replace your current one. The new loan could have a lower interest rate, a different loan type (like a fixed-rate instead of an adjustable-rate), or a shorter or longer term. You might also choose to refinance to tap into the equity you've built up in your home, known as a cash-out refinance.
Refinancing your mortgage can have several benefits, including:
Lower interest rate: You could get a lower interest rate, which means you'll pay less interest over the life of the loan.
Lower monthly payment: If you refinance to a lower interest rate, your monthly mortgage payment will decrease.
Access equity: If you've built up equity in your home, you can use it to pay for other expenses or consolidate debt.
Change Loan Type: You could refinance from a variable rate mortgage to a fixed-rate loan, which means your interest rate will never change.
Shorten Loan Term: If you refinance to a shorter term (from a 30 year mortgage to a 15-year mortgage), you'll pay off your mortgage faster and save on interest.
Yes, there are costs associated with refinancing, including:
Closing costs: These are fees charged by the lender for processing the refinance application.
People have many reasons for refinancing (lower interest rate, cash-out, etc.), but if your reason is to lower your interest rate, we can help you compare the costs of a new loan to the reduced interest you'll be paying each month. Typically, this involves a large upfront cost, but continued monthly savings over time. In order to understand the benefits over time we'll help you calculate your break-even point.
Let's say it costs you $1,000 to refinance and that will lower your interest rate enough to save you $100 per month. This means that it will take you 10 months to save $1,000 in interest to reach your break-even point. After that point, you'll be saving $100 per month more compared to your previous loan.Now the math is a little more complicated than that because your monthly interest will change each month as you pay down the principal. For many loans this takes 3-5 years to recoup the costs. That's one of the benefits of calculating the break-even point is that it can help you make longer term decisions that are based on your financial situation.