Here’s why you should (or shouldn’t) refinance your mortgage June 8, 2021 Refinancing your mortgage can be a good idea, but it depends on your unique financial goals and the costs of refinancing. (iStock) In 2020, mortgage refinancing activity reached record highs. As a result of lower mortgage rates, refinance volume on home loans increased more than 100% from the previous year, according to Freddie Mac. By refinancing to a lower interest rate, some homeowners were able to refinance their mortgage with a better credit score and profile, lower their monthly mortgage payments, shed homeowners insurance or switch to a lender with more favorable terms.While those are all good reasons to refinance, due to the costs associated with mortgage refinancing, it doesn’t make sense for everyone. If you’re considering it but aren’t sure if it’s right for you, visit Credible to get in touch with experienced loan officers to get your mortgage questions answered.ARE YOU STILL CONSIDERING A MORTGAGE REFINANCE? WHY YOU SHOULD ACT NOWTwo of the most popular types of mortgage refinances include: cash-out refinancing and rate and term refinancing. Cash-out refinancing involves taking out a new mortgage loan that’s larger than your current mortgage balance. The lender gives you the difference in cash, which you can use to improve your home or consolidate debt. By contrast, a rate and term refinance involves taking out a new loan that is equal to your current mortgage balance. The new loan pays off your mortgage and you can get a better rate or more favorable mortgage terms.Pros of a home loan refinanceBefore deciding whether refinancing your mortgage is the right move for you, you should weigh the pros and cons. Let’s consider the pros first.The pros of refinancing your mortgage include:Lower mortgage paymentsReduced loan termPaying off debtMore cash for home improvements1. Lower mortgage paymentsIf you refinance your mortgage at a lower interest rate, you can reduce the amount of interest you pay monthly. This can lead to lower payments if you choose a longer or similar loan term. Although 30-year mortgage rates have been rising since the beginning of 2021, they have fallen since peaking at 3.18% on April 1st. At the end of April, the average 30-year fixed rate was 2.98%, according to Freddie Mac. The rate remains near historical lows.To estimate what your new monthly cost would be after refinancing your mortgage, use an online mortgage refinance calculator. You can visit Credible to compare rates without impacting your credit score.2. Reduced loan termAnother way of reducing the amount of interest you pay is to refinance from a longer loan term to a shorter one. For example, if you refinance from a 30-year mortgage to a 15-year mortgage, you’ll pay less interest during the life of the loan.3. Paying off debtBy lowering your mortgage payment or using a cash-out refinance, you can free up money to put toward high-interest credit card debt. If you don’t have any other credit card debt, the extra money saved on monthly payments can be redirected to building your savings. If you’re considering refinancing your mortgage for debt consolidation, visit an online marketplace like Credible to view refinance rates and get cash out to pay off high-interest debt.SHOULD I REFINANCE MY MORTGAGE TO CONSOLIDATE DEBT?4. More cash for home improvementsIf you put the monthly savings from refinancing your mortgage in a home improvement fund, you’ll have more money to pay for essential home repairs or improvements.CASH-OUT REFINANCE: PROS, CONS, WHEN TO GET ONECons of a mortgage refinance Although it may be tempting to jump on the bandwagon of refinancing to a record-low mortgage rate, take a moment to consider the cons of mortgage refinancing.Increased monthly expensesUnaffordable closing costsPlanning to move soonMore debt1. Increased monthly expensesRefinancing your mortgage can increase the length of your loan. This may increase the amount of interest you pay in the long run, potentially negating the benefits of refinancing.2. Unaffordable closing costsWhen you refinance, some lenders will charge you closing costs, application fees and appraisal fees. These fees can make the costs outweigh the benefits of refinancing.In addition, if your home appraisal comes in too low, you might not be able to get the best mortgage refinance rates. 3. Planning to move soonIf you’re planning to move soon, you risk not breaking even on the upfront cost of refinancing. To enjoy the long-term benefits of refinancing, you’ll have to stay in your home for several years, depending on how high your previous mortgage rate was. The number of years depends on how much you spent on refinancing fees.SHOULD YOU REFINANCE YOUR MORTGAGE IF YOU PLAN ON MOVING?4. More debtBy choosing the cash-out refinance option, you’ll end up with more debt. This might make it more difficult for you to save money.The bottom line Refinancing your mortgage is a personal decision and homeowners should consider their unique financial situations. Pros include lowering your monthly payment, paying off debt faster and having more cash for home repairs. However, cons include increased monthly expenses, unaffordable closing costs and moving before reaping the long-term benefits.To explore your mortgage refinance options, visit Credible to compare rates and lenders.Have a finance-related question, but don't know who to ask? Email The Credible Money Expert at [email protected] and your question might be answered by Credible in our Money Expert column.Source: Read Full Article Utopia P2P’s Crypton: Combining Privacy and Staking Rewards in One Cryptocurrency Guatemala protesters display signs telling Harris to 'mind your own business'