Part of being financially savvy is knowing the right time to refinance.
When you refinance, you’re essentially replacing your existing loan with a new loan, and in most cases, “refinance” is done to take advantage of lower interests rates.
But a refinance doesn’t make sense for everyone. So if you’re thinking about taking a Refinance in Manchester, NEW HAMPSHIRE here are some of the critical things you should know.
Refinancing May Lower your Monthly Payments
Reiterating to what we mentioned above, the primary motive behind refinancing is to take advantage of the lower interest rates.
Lower interest rates will consequently translate to lower monthly premiums and this will lower your interest rates.
However, it’s essential to keep an eye and refinance at the right time. If the interest rate drops lower than your current loan rate, it can make quite a notable difference in your monthly cash flow.
Refinancing Costs Money
While refinancing can lower your monthly payments, it doesn’t mean you’ll save money.
See; when you take out a loan, you’re required to pay closing costs-a one-time fee you pay when you refinance your loan.
The closing cost typically runs anywhere from 2 to 5 percent of your loan amount. The closing cost can either be paid out of pocket or rolled into your loan amount.
However, if you don’t want to pay the costs upfront, you can opt for a no-cost refinance, meaning you pay nothing out-of-pocket, but end up paying higher interests rates for your new loan.
Whatever option you choose to follow, you’ll seriously need to crunch the numbers to compare your options and determine which type of Refinance in Manchester, NEW HAMPSHIRE will make more sense for you.
Refinancing Resets the Life of Your Loan
Often when you refinance, you extend the amount of time it’ll take for you take to pay off your loan.
For instance, assume you’re five years into a 20-year loan, and you refinance it with another 20 years loan. Now, you’re going to pay off your loan in 25 years.
While you may have lowered your monthly payments, you actually not be saving money because you’ll be making payments for a longer period.
Conversely, if you switch to a refinance with a shorter term, say from a 20-year loan to 10-year loan, you’d save money over time and pay off your mortgage faster. The caveat, however, with shortening the life of your loan means that your monthly payment will likely increase.
You Could Cash Out
If you’ve built equity in your homes, you may have the option of cashing-out refinance.
This will allow you to take out a new loan for more than how much you owe on your current loan and then pocket the difference.
Typically, most of the lenders will allow you to take up to 85% of your loan-to-value ratio, which is the amount you borrow from the lender, divided by the value of your home.
Though lenders will allow you to spend the money however you see fit, you should have a good reason for withdrawing the money.
A refinance could cancel your PMI
If you’re currently paying for private mortgage insurance (PMI) on your loan but have signed a substantial amount of equity in your home, Refinance in Manchester, NEW HAMPSHIRE could enable you to cancel your mortgage insurance.
Regularly reviewing your loans will give you the chance to keep up to date with the latest products and interest rates on offer. Find a lender that understands what you’re looking for and explain to you the basics of refinancing.
Nextgen Mortgage offers very competitive home loans, with a broad range of features. This is not to mention; we have a team of lending specialists ready to answer any questions you have.
