Refinancing your home might look like a good solution to decrease your mortgage payment. But, it is essential that you understand how a refi might affect your family. You need to protect the financial security of your family, so talk to a professional team to see if a refinance is right for you.
Here are a few factors to consider that might impact your family:
The Cost of Refinancing
Even though you will be cutting down your payment, it is essential to consider the overall cost that will be paid over the life of the loan. It costs money to refinance because you will have expenses such as closing costs and fees. These costs could be as much as 2 – 5% of your mortgage!
Compare the options of closing costs with refinancing offerings that don’t require these upfront fees. If you don’t pay closing costs, then you can expect to have a higher interest rate. Always calculate the overall savings if you choose to refinance. You might find that the long-term savings aren’t as good as you thought when you factor in the fees and closing costs that will be required.
Get Rid of Private Mortgage Insurance
Certain loans require Private Mortgage Insurance (PMI), usually when the mortgage is more than 80% of the value of your home. You can avoid this payment by paying off the home enough to increase your equity.
Refinancing might help you to adjust the balance so that you are no longer required to pay PMI. When the property is appraised for the refinance and the new mortgage is less than 80% of the home value, then you can get rid of the PMI payment and put that money toward your mortgage instead.
Resetting Your Home Loan
Home loans are structured with a specific lifespan, usually 15, 20, or 30 years. Choosing to refinance means that you will be resetting the life of the loan. For example, if you have had the same mortgage for many years, then it means that you have paid down a lot of the interest costs and now a high portion of your payment is paid directly to the balance of the loan (instead of interest).
On the other hand, refinancing will reset the clock so that you have to pay the up-front interest costs again. Look at the long-term amortization comparison so that you can see the length of time it will take to pay off your current loan compared to refinancing.
Talk to a Real Estate Professional
As you can see, there are pros and cons to refinancing your current mortgage. If you are thinking about making any changes to your family home, then the best thing that you can do is talk to an experienced real estate team. Contact us at DUFFY Realty, and we will help you find the best solution to create a home that your family will love: (678) 318-1700