If you live on Long Island and you’re thinking of refinancing your mortgage, it’s important to thoroughly research the pros and cons. In doing so, you may discover that a mortgage refinance can positively impact your financial standing and your bottom line. Let’s discuss the many ways a refinance may be able to help you.
Save money on monthly payments
With today’s low interest rates, you may be able to reduce your monthly mortgage payment. This will free up money to devote to savings or to use for other monthly expenditures. While most mortgage loans are accompanied by closing costs and fees, speak with your loan representative about the possibility of rolling those into your monthly payment.
For instance, let’s say your current mortgage loan balance is $300,000 and you have an interest rate of 6% with 20 years left to pay it off. If you refinance at a rate of 4.5% (1.5% lower), instead of a monthly payment of $2,149.00, your new payment would be $1,898.00. That represents a total savings of over $60,000 in 20 years!
Lock in a low rate
If you currently have an adjustable-rate mortgage (ARM), it’s a great time to secure a fixed-rate loan to ensure budget certainty for your future. This is especially true if you plan on owning your home for a long time. With a fixed-rate loan, the interest rate doesn’t fluctuate so your payment amount is the same each month. In order to make the most of your money, the ideal time to transition from an ARM to a fixed-rate loan is when rates are low so you can protect yourself in the event that rates go up.
Consolidate your loans
Borrowers who initially took out their mortgage prior to 2007 may have a first and second loan on their homes. Refinancing can enable them to combine their loans, often resulting in streamlined debt, lower monthly payments, and long-term security. That’s because they can eliminate the higher rate and/or the sizeable payoff amount connected to the second loan (which may be an ARM or a balloon-note mortgage). If these borrowers can replace both loans with one 15- or 30-year mortgage and take advantage of today’s low rates, they’ll be able to substantially reduce their monthly payment and avoid paying a large lump sum at the end of the loan.
Get out of debt sooner
Those who refinance often have the option of choosing a loan term as low as 10 years, which could allow you to free yourself of mortgage debt sooner than with your old loan. This is a particularly good idea for borrowers who plan on retiring within the next 15-20 years. By reducing your loan term, you will make higher monthly payments in order to pay off the loan sooner. Borrowers who are able to secure a lower interest rate when they refinance with a reduced loan term have the added bonus of saving even more money over the life of their loan.
To find out if a refinance would benefit your specific situation, contact Cliffco Mortgage Bankers today and one of our licensed mortgage consultants will be happy to provide you with more information.