Refinancing is replacing your current mortgage with a new mortgage that is a better financial fit for you. Several factors come into play to determine if it’s a smart idea to refinance your mortgage. You need to examine the current mortgage loan interest rates, the closing costs involved, and how much more time you plan to spend in your home.

Benefits of refinancing your home

The benefits of refinancing depend on your financial situation and how a new mortgage could help your family meet your fiscal goals and needs. 

Benefits of lower interest rates 

You may be like the majority of borrowers who want to secure a lower mortgage loan interest rate. Just shaving a couple percentage points off the interest charged could save you thousands of dollars over the course of the loan. It’s also a good time to explore your refinancing options if you’ve recently improved your credit score.

Benefits of looking for a longer term

You may want to lower your monthly payment by spreading out the principal over more payments allowing you the extra financial flexibility to use your money each month for more pressing needs. Generally, lengthening the term of the loan also adds to the total cost to pay off the principal, as it gives interest more time to accrue. 

Benefits of looking for a shorter term

You may want to consider shortening the term of your mortgage loan to help you meet your long-term financial goals. Shortening the term from a 30-year mortgage to a 15-year mortgage saves a significant amount of money over the course of the loan. The monthly payment will likely increase, but you’ll save thousands over the course of the loan by paying off the principal more quickly. And with a lower interest rate, the increase in monthly payments could wind up being fairly minimal.

Benefits of borrowing money

For homeowners looking at a major expense like college for the kids or an emergency, refinancing the mortgage is often the best way to borrow thousands of dollars at a reasonable interest rate. The funds can be used for anything and it’s simply tacked onto the principal. Refinancing in this situation is far more cost-effective for a family than lines of credit or personal loans.

Easily calculate your new mortgage with our home loan calculator

Use this mortgage calculator to estimate your monthly mortgage payment, including insurance and taxes.

Simply enter the price of the house and details about the home loan, including mortgage rates and terms. Our home loan calculator will estimate your payments and give you a complete picture of your mortgage options.