With the incredibly low interest rates lately, you may see an opportunity to refinance your home and save money. If you are planning on staying in your home for an extended period of time, refinancing your home could reduce your monthly payments and save you money. Before you refinance a home, make sure it is right for you.
Is it worth it?
Evaluate your current mortgage rate and determine if refinancing into a lower rate will actually save you money. By knowing exactly what you will save and how long it will take to recoup the refinancing fees, you can determine if refinancing your home is appropriate. You can use Bankrate.com’s home refinance calculator to get a quick estimate.
What will you do with the cash?
Before you decide to refinance, make sure you know what you will do with the newly available funds. If you are married, make sure you and your partner are on the same page. Refinancing your home can be a great way to generate cash, but the goal is to pay off the home and be debt-free.
Avoid paying off other debt
It may seem like a good idea to refinance a mortgage to pay off high-interest credit cards or other lingering debt; however, it’s very likely that you will end up in a worse scenario than before. If you have other debt, try to keep it separate from your home, and don’t refinance your home to try to clean it up.
ARM or fixed mortgage?
When you refinance your home, you will probably have the opportunity to change your mortgage to either an adjustable rate mortgage or a fixed mortgage. Your choice depends heavily on how long you plan to live in your home. You can use Bankrate.com’s ARM or fixed mortgage calculator to test your options. Watch out for any additional fees or penalties if you change your mortgage structure.
If you need more information, you can learn how to refinance homes in Bankrate.com’s refinancing section.