When it comes to your refinance, you’ll likely want to calculate your savings.
The time that you plan to stay in your home is the time we use to add up your total savings. You can think of your total savings made up of up two separate parts:
- Cash savings
- The difference in the amount you owe on your new mortgage
Your cash savings are made up of your current mortgage payments + (your new mortgage payments – around 3% of the loan or the amount you must fork up for closing costs).
The difference in the amount that you still ower is the amount of principal on your current mortgage – the amount of principal you will owe when you refinance your loan.
Why The Lenght Of Time Spent In Your Home Matters
You must first decide whether refinancing makes sense or not. One of the first steps to do this is to decide how long are you planning on staying in your home.
Are you planning on moving soon?
If so, spending a few thousand dollars might not make sense just to lock a lower rate in. On the other hand, if you are planning on staying in your home over the total life of your loan, refinancing could be in your favor. This is because when you refinance, you extend the loan term, allowing you to save some cash in monthly payments.
It is worth noting that the interest will build due to the longer term, so you will end up paying more on total interest in the long run.
Top Reasons To Refinance Your Mortgage
- Acquire A Lower Interest Rate: If the repayment term remains the same, reducing your mortgage rate can also help to reduce your monthly mortgage payment. This makes a lot of sense for those who have improved their credit scores over the years. You may end up qualifying for a much lower score than you thought. Of course, this is why it is important to check your credit score before refinancing.
- Switching From An ARM To A Fixed Rate: Adjustable-rate mortgages will usually have a steady rate for the initial period, though that rate will end up floating for the rest of the term. If you might only live in your home for a couple of years, an adjustable-rate mortgage could make sense. On the other hand, you could do yourself a solid by having a fixed interest rate for 30 years.
Let Us Help You Refinance!
Here at NESWork, we’re all about helping our clients and customers get through the mortgage process with ease. There is no question that things can be confusing, especially for first-time home buyers.
Luckily, our small, boutique firm allows us to work closely with our clients to make sure that they find the right loans for their needs from the top mortgage broker in Denver, CO.
If you’re ready to take the leap and buy that home you have been dreaming of, then make sure to get in contact with us!