Explore the Financial Benefits
Refinancing a Home
There are a lot of factors to consider when deciding to refinance your home, but this important financial decision can come with appealing financial benefits including lowering your monthly mortgage and consolidating debt. If you’re thinking about refinancing your home, following these key steps will help make the decision as simple as possible.
First, you need to ask yourself if refinancing is right for you. Examining the long- and short-term benefits of refinancing can tell you whether this will be a smart decision for your unique situation. It’s important to remember, refinancing doesn’t get rid of your debt. However, it can lower your monthly payments, help finance your home equity, reduce the length of time for your loan, or even change the type of mortgage you have.
Your payments on your refinancing are determined by multiple different factors. Familiarizing yourself with the process itself will help you make the right decision.
Here are some terms you should know when looking into refinancing your home.
Interest Rate: How much additional money you pay on top of the money that you borrow for your loan. Your interest rate can be based on several things including your credit score, the size of your down payment, and the type of mortgage you receive.
Discount Points: The value of one discount point corresponds to 1% of your total mortgage. Points are paid as a fee when you first purchase your mortgage at closing in exchange of a lower interest rate. Discount points, while expensive upfront, can save you significant money long term over the course of your mortgage by lowering your monthly payments and decreasing your APR. However, it’s important to crunch the numbers, it’s generally advised that a longer mortgage pay more points.
Origination Fees: Fees charged by your mortgage lender for making a real estate loan and typically a percentage of your mortgage. Sometimes these fees can be refinanced as part of your loan itself.
Loan Term: How long you have to pay off your loan.