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How to Decide if You Should Refinance Your Mortgage

April 21, 2022

Man deciding if he should refinance his mortgage

If you’re thinking about refinancing your mortgage, ask yourself: Should I refinance my mortgage? Will I save money? Read on to discover how to look at the numbers so you can decide if refinancing is right for you.

How much will my interest rate decrease?

Looking at the numbers is the best way to decide if you should refinance your mortgage. Refinancing is worth pursuing if you can lower your interest rate by at least 1%.

How much will my payment decrease?

If you can lower your payment by at least $100, refinancing is worth it. At Homestead Financial Mortgage, our clients save an average of $300 per month. That’s especially true if you have private mortgage insurance (PMI).

Can I eliminate PMI?

If you have PMI ­– refinancing from an FHA loan into a conventional loan will remove it if you have 20% equity. That can reduce your monthly payment even more.

Can I reduce my term?

With rates at historic lows, 20-year and 15-year , fixed-rate mortgages are within reach for many borrowers. You’ll save thousands of dollars of interest with a shorter term. You can also pay off your home loan faster by paying extra on your principal each month.

Should I Consolidate My Debt?

If you have equity in your home and struggle with high credit card balances, consider a cash-out refinance to pay off your debt and enjoy having more room in your budget. Consolidating your debt can give you breathing room and relieve stress. It’s important once you consolidate that you stick to a budget and don’t fall into the trap of racking up credit cards again.

Refinancing to Purchase Another Property

If you’re considering buying another property, whether it’s an investment or a second home, refinancing your primary residence could be the cheapest way to go. That’s because rates for owner-occupied properties are lower than other occupancy types.

Cash-Out Refi for Renovations

Spring Home Rennovation Trends - Interior Kitchen Renovation

Another reason a homeowner might decide to refinance – even if rates are higher is to get cash out for renovations. Of course, you have to compare getting a cash-out refi to a home equity line of credit (HELOC). But it might be the cheapest option.

Should I Refinance My Mortgage – Rule of Thumb

The basic rule of thumb is if you can save 1% on your rate, it’s a good time to refi. But that doesn’t hold true for a jumbo loan. Since jumbos are much larger loans, you don’t need a full percent to make it worthwhile. The other thing to look at is how long will it take you to break even. If it takes you two years to break even and you know you’ll be in the home five years – it’s worth considering.

Refinance with Homestead Financial Mortgage & Save

Hopefully, this article has answered the question: How to decide to refinance your mortgage. It’s not always an easy decision. But we can go over different options so you can see what’s best for your situation.

Homestead Financial Mortgage is a top mortgage lender for homebuyers looking to refinance or purchase a home. Our low-interest home loans are some of the best in the states we serve. We service Arkansas, Colorado, Florida, Illinois, Indiana, Kansas, Missouri, Ohio, Tennessee, and Texas. Contact us today to learn more about the home loan products we offer that are right for you.

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