Refinancing your mortgage can be an excellent opportunity in many cases, especially when interest rates lower and the opportunity allows you to ease your monthly cash flow or even pay off your home sooner. At the same time, there are scenarios in which even if you think it is a good time to refinance your mortgage, it may be better to hold off.
- To switch to a longer loan—When you refinance your mortgage at a lower interest rate, you can save money on a monthly basis, but this does not always extend to the overall cost of the loan. For example, if you have 10 years left on your mortgage but you refinance to a 30-year mortgage, you will pay more in interest over the span of the new loan than if you remained with your current mortgage.
- To save money for a new home—Before you refinance your mortgage, you need to determine how much the refinancing process will cost and how much money this will save you every month. If, for example, it will take four years to break even on the expenses of a refinance, but you plan to move in three years, you may not save any money, despite the lower monthly payments.
- To obtain cash for investing—The problem with cash is that it can be far too easy to spend. Keep in mind that paying down your mortgage up to 6% every year is often a better financial move than placing extra cash into an investment account that earns a lower interest rate.
At the BRM Lending Team, we exist to help you facilitate your financial plans. If you have questions about refinancing your mortgage and if this is a beneficial opportunity for your plans and goals, contact us today.