To refinance a mortgage means to pay off the loan completely, and then replace it with a new one. This may sound convoluted or unwieldy, but actually, it’s something many homeowners find to be advantageous. That’s not to say that refinancing is for everyone, though. There is a time and a place for it, and in this post I’ll walk you through a few specifics.
With that said, the best advice about refinancing is to always talk it over with a loan professional. Your mortgage officer can actually run the numbers with you and determine exactly how much it will cost or how much you will save through refinancing. This is always something you should do before you make the final decision to refinance your loan!
There are a number of reasons why you might refinance, and foremost among them is securing a lower interest rate. If you bought your home back when interest rates were higher than they are today, refinancing really might be in your best interests. The rule of thumb is that, if there is at least a two percent difference in your interest rate and the current interest rate, refinancing is very much worth your time.
You might also refinance in order to reduce the term of your loan. For instance, if you have a 30-year mortgage, you can refinance it to a 15-year loan. Lower interest rates can make this an affordable move for you to make—and then, you’ll get it paid off much more quickly!
Along similar lines, refinancing allows you to convert between adjustable rate and fixed interest rate mortgages. Essentially, refinancing allows you some flexibility—and if you’re not satisfied with your current mortgage, it’s something to at least consider.
As an additional incentive, refinancing your loan can help you to tap into some of your home equity—basically freeing up some cash to do something like pay for a big home renovation. That’s another big reason why some homeowners consider refinancing.
Why Wouldn’t You Refinance?
Again, though, refinancing is not for everyone. Refinancing will require you to spend some money—essentially paying “closing costs” to your mortgage officer to process the new loan. This may be a percent or two of the total loan amount. It won’t always be worth it, either, especially if interest rates haven’t changed much since you first took out your loan. His is why it’s so important to run some actual calculations with your loan officer before you do anything else.
More Questions About Charlotte Real Estate?
To learn more about refinancing, reach out to me and I’ll be happy to refer you to a great lender. And if you have additional questions about buying or selling real estate in North Carolina, I can help with that, too. Ryan Minges is here to assist with all real estate needs in the Charlotte area. Connect with me today to see some homes or to ask any questions you may have!