How And When to Refinance Your Mortgage

Understanding how and when to refinance your mortgage is crucial for maximizing savings and reaching your financial goals. Homeowners might consider refinancing for a variety of reasons based on their unique situation and circumstances. Most commonly, refinancing is done with the goal of securing a lower interest rate, shortening the loan term, lowering monthly payments, switching loan type or taking out equity. Timing and strategy are key, but under certain circumstances, refinancing your mortgage can be a smart financial decision.

The first step you should take when considering refinancing your mortgage is to speak with a Loan Officer. They’ll help talk through your unique situation and available options.

When deciding if now is the right time to refinance your mortgage, there are several factors you should consider:

• Interest Rates: Securing a lower interest rate can reduce your monthly mortgage payment and save you thousands over the life of the loan. Your Summit Loan Officer can help you compare current interest rates to your existing mortgage rate to determine if refinancing will be beneficial.

• Loan Term: Refinancing gives you the opportunity to adjust the length of your mortgage term. A shorter term means you will pay off the loan faster, though it may increase your monthly payments. Extending the term can lower your monthly payment, but you’ll pay more in interest costs over the term.

• Closing Costs and Fees: Just like a standard mortgage purchase transaction, a refinance comes with costs such as origination fees, appraisal fees and closing costs. Ensure that the savings you gain from refinancing outweigh these expenses by calculating the break-even point.

• Break Even Point: Calculate your break-even point, which is when the savings from refinancing your mortgage offset the costs by dividing the total loan costs by the monthly savings. If you plan to stay in your home beyond this point, then refinancing may make sense. When you speak with a Summit Loan Officer about refinancing, they can help you with this calculation.

• Home Equity: The amount of equity you have in your home can impact your refinancing options. More equity can result in better terms and the opportunity to avoid private mortgage insurance (PMI). When you refinance, you may also be able to take out some of the equity you have in your home and roll that amount into the new loan. People often do this to cover large expenses such as a home remodel.

Considering these factors can help you make an informed decision about whether refinancing your mortgage is the right move for you. Find a Summit Loan Officer to help guide you through the process and access any questions you may have.

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