Mortgage Refinance
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Refinancing can potentially lower your monthly mortgage payment, pay off your mortgage faster or get cash out for that project you've been planning. All of that saving can have a positive impact on your budget. Read on to see if refinancing is the right choice for you.
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What is refinancing?
When you refinance, you acquire a new mortgage loan which is used to pay off the original loan. Your new monthly payment, length of loan, and interest rate are all based on the terms of the new loan.
Why refinance a mortgage loan?
Depending on your financial circumstances or current interest rates, there are several ways refinancing could be beneficial to you. Here are some of the common reasons to refinance.
- Reduce your monthly mortgage payment.
- Save on overall interest with a reduced interest rate.
- Pay off your loan faster (if you elect a shorter loan term than what remains on your existing loan).
- Free up equity for home improvements or other uses.
- Pay off higher-interest debt with equity.
- Potential to cancel your private mortgage insurance.
When is the best time to refinance?
The ideal time to refinance is based on your personal circumstances. A good time to refinance is typically when you can qualify for a low enough interest rate to save you money over the life of your loan, even after the cost of refinancing. Generally, if you can reduce your interest rate by half of one percent or more, then the saving could be worth it. You will need to keep your home long enough to realize the savings.
Refinancing costs and your breakeven point
Whenever you refinance, you're responsible for paying closing costs. The breakeven point is how long it takes for a reduction in your monthly payments to equal the cost of refinancing. If you plan to sell your home before the breakeven point is reached, you may not recover the closing costs. Here is an example of how to calculate your breakeven point.
$3,000 in closing costs / $200 in monthly payment savings = 15 months to break even.
Let Us Help You Calculate Your Potential Savings
Contact a First National Bank mortgage lender who can run the financial numbers for you to see if refinancing is the best option for your situation. This no-cost, no-obligation consultation could save you a lot of money and provide you with an estimate of refinance costs.
To determine your total savings, you'll need to know your current loan amount, loan interest rate, term, and origination year.
Call 515-232-5561 or 641-342-6581 and ask to speak to a mortgage lender; or use the contact form to connect with a lender. You can also book an appointment online.
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