If you’re wanting to take advantage of mortgage rates that are still historically low but aren’t wanting to buy a new home, doing a FHA streamline refinance or other type of refinance could be a great option for you. However, there is more to consider than just getting a lower interest rate.
To ensure that this is the best financial choice for you, here are three things to consider before choosing to refinance your home loan.
Your Reasoning For Refinancing
Before you choose to go through with the process of refinancing your home loan, you should first determine what your reasoning for wanting to do this is. Depending on the answers that you come up with, you will better be able to determine if a refinance will actually be able to get you the results that you’re wanting in a reasonable timeframe.
For some people, doing a refinance will allow them to pay less money in interest over the life of their loan. For others, the main goal is to reduce their monthly mortgage so that they aren’t so strapped for cash each month. And still for others, a refinance may allow them to get some cash out of their home so that they can either reinvest in improving their property or use that money for other purposes. But as long as you know what your main goal is with your refinance, you can look at the terms to see if this will actually be accomplished.
When And If You Plan To Move
While accomplishing any of the above-mentioned tasks may be great for you, another thing you’ll want to consider is how long you plan to live in the home that you’re thinking about refinancing. Because in order to make a refinance worth it to you, you’ll want to be sure that you’ll be in the home for a while after the refinance is completed.
If there is any chance that you might be selling your home soon, it might not be a good idea to refinance your home loan, even if you think you could get a lower interest rate or a smaller monthly mortgage during the time you’d be living there.
How Much The Refinance Will Cost You
The reason you might not want to refinance if you’re planning on moving soon is because you might not recoup the costs of the refinance prior to moving, which could cause you to pay even more money than if you hadn’t refinanced.
To help determine if this would happen, you’ll want to find out how much it will cost you to refinance. For most refinances, it costs between three and six percent of the loan amount to refinance the loan. While you can sometimes get a no-cost refinance, this likely won’t secure you as low of an interest rate. So before you decide to refinance, make sure you’ve calculated your breakeven point.
If you’re thinking that you might want to refinance your home, consider using the tips mentioned above to know what you should think about to determine if this is the right choice for you.