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Will Refinancing Your Mortgage Today, Save You A Small Fortune?
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Save thousands in interest by having your Mortgage refinanced!
With mortgage rates at all-time lows, it’s no surprise that refinancing applications have exploded lately.
Home owners want to know how much lower their monthly payment will be if they refinance, but there are savings to consider in the long term as well. You can save many thousands of dollars by shoring up your principal whilst keeping those nasty rates low.
Save thousands in interest by having your Mortgage refinanced!
With mortgage rates at all-time lows, it’s no surprise that refinancing applications have exploded lately.
Home owners want to know how much lower their monthly payment will be if they refinance, but there are savings to consider in the long term as well. You can save many thousands of dollars by shoring up your principal whilst keeping those nasty rates low.
Calculate How Much You Can Save Monthly By Refinancing Your Mortgage.
Calculate the percentage of your current mortgage payment that is made up of principle and interest (P+I). This amount should be included on your most recent mortgage statement; if not, deduct your monthly escrow payment from your total mortgage payment.
Then, determine the amount of your new mortgage payment if you refinance. If you acquire a refinancing quotation by a lender, this step is almost certainly taken care of for you. Alternatively, you may use a mortgage calculator to determine your monthly payment. Calculate your monthly savings by subtracting your prospective new payment from your existing P+I mortgage payment.
Refinancing Can Be A Great Way To Lower Your Monthly Mortgage Payments!
When you refinance your mortgage, you will typically get a new 30-year loan. Meanwhile, the mortgage being replaced will have a different payback schedule.
As an example, suppose you’re five years into a $300,000 mortgage with a 4% interest rate. Your monthly P+I payment is $1,433, and you are still responsible for about $271,000 of your initial total.
Assume you opt to refinance the remaining amount with a new 30-year mortgage at a 3.25 percent interest rate and $3,000 in closing expenses. You’ll have a new P+I payment of $1,180 per month, which will result in a $253 reduction in your monthly mortgage payments.
Make Significant Savings Over The Life Time Of Your Mortgage
If you stick with the original mortgage, you’ll pay $1,433 every month for another 25 years, totalling $429,900. Whereas your monthly repayments will be reduced to $1,180 per month for 30 years, when you choose to refinance. You’ll pay a total of $427,800, including the $3,000 refinancing fee.
So, in the long term, refinancing will save you $2,100. It’s still the less expensive alternative, and it may be able to help you save money each month. The difference in monthly payments, however, does not indicate a significant amount of savings when it comes to the total payment over the life time of the mortgage.
Cash Out Mortgage Refinancing Can Free Up Much Needed Liquidity At A Lower Cost Than Standard Loans.
Naturally, not every mortgage refinancing scenario is straightforward in terms of long-term savings. This is particularly true if you are refinancing with cash out, since the new mortgage will have a bigger principal sum than the one it replaces.
As an example, suppose you refinance your $300,000 mortgage amount at a 5% interest rate with a new $400,000 loan at a 3.25 percent rate, increasing your monthly payment by $200. Now, it seems as if you are not saving money, since more money will be withdrawn from your bank account each month to cover your obligations. However, this is a far less expensive method of borrowing $100,000 for a home renovation project or other large cost than taking out a personal loan or borrowing in another manner.
Is Your Current Mortgage Lender Giving You The Best Rates Available? Shop Around Today!
The majority of home buyers only apply for a mortgage with one provider. It may be a bank with whom they already have a connection, or it could be an internet mortgage lender with a reputation for inexpensive rates. But which of them yields the most favourable loan terms? Unfortunately, none of these approaches is often the best option. That is why it is critical to shop around for the best rates.
Mortgage rates aren’t standardized, which means that although they fluctuate in reaction to market circumstances, each lender sets its own rates and uses its own methods to assess borrowers. To cut a long tale short, it’s absolutely conceivable for two lenders to give a consumer drastically different mortgage APRs.
As a result, it’s a good idea to apply for a mortgage refinance with a few different lenders. I usually recommend applying to five different lenders, including a big national bank, a local financial institution, a credit union, and an online-based lender. Sure, doing so will take a few additional hours, nevertheless, the extra time may save you a lot of money.
