We are not done with the refinance talk yet! As more people are trying to make the right decision for themselves and their family as far as if they should refinance or not, we are happy to help answer any questions people may have. Some of you have asked us if you should refinance or if you should pay a bit extra toward your mortgage. For most people, it makes the most sense to refinance since their interest rate will be significantly lower. (If it is not, there is no reason to refinance.) But for some people, it saves more money in the long run by just paying extra toward your mortgage monthly. Your current loan and interest rate play a large part of making the right decision. Your family’s needs also play a role in the decisions as well, along with any financial goals you may have.
If you can lower both your interest rate and your monthly payment, it would be beneficial for you to refinance. When you refinance, do not forget that you still have to pay closing costs and other fees. Do not forget to factor this amount of money into the decision. If you are wanting to use some of your home equity, a cash-out refinance is a great option for you. The money you take out can be used for a variety of things – renovating your home, paying off credit card bills, etc. If you think you are going to stay in your home for a significant amount of time, it would be beneficial to refinance as you will truly be able to reap the rewards of saving money.
Now when looking into making extra payments instead, there are a few things to keep in mind. To start off, by paying extra, you will be lowering your loan and paying off your loan faster. This is a good idea if the potential savings of refinancing is not enough for you to benefit from refinancing. If you think you may sell your home in the near distant future, making extra payments on your mortgage is the way to go. You will likely save money from not having to pay a closing cost and other fees if you were to refinance – and then you turn around shortly after and sell your home.
We would recommend you really figure out your goals with your house for the foreseeable future, along with planning out how much money you would potentially save. This will help you to figure out which decision is best.