Just because interest rates are low, refinancing your mortgage may not necessarily be the smart money move you think it is. Here’s how to determine what benefits you and your family the most.
A few years after making monthly mortgage payments, many homeowners start wondering whether they should refinance. Refinancing a mortgage can sometimes save you a lot of money, but it’s not always your best move.
What is refinancing?
First, let’s review just what refinancing is. Remember how you got a mortgage when you bought your home? Well, when you refinance, you essentially trade in your current mortgage for a newer one — ideally one with more attractive terms. The new loan pays off the first one.
The main reason most folks refinance a mortgage is to take advantage of a lower interest rate and thereby end up with smaller monthly payments. But that’s not the only possible reason. You might refinance a 30-year loan into a 15-year one, ending up with larger payments, but fewer of them, and less total interest to pay.
Read more: When Is It Time to Refinance My Mortgage?