My dream came true about a year and a half after I moved to Florida. I bought a new build house which was an interesting experience that you can read about here.
I’ve been a homeowner for a little over four years as of the writing of this post and I’ve been steadily paying off my mortgage. I would like to pay it off early so when I saw that mortgage rates had dropped drastically I thought about it and decided it would be in my best interest to refinance.
(This information is not meant to be financial advice and is just for educational purposes. This post may include affiliate links. Should you click an affiliate link and make a purchase I may receive a small commission at no extra cost to you.)
So we’re all on the same page, refinancing is replacing your current home loan or mortgage with another one with different terms that are more in your favor.
By refinancing I could get an interest rate that is a lot lower than for my original loan, so over the length of the loan, I’m paying more towards the principal and less towards interest. I could also drop the Private Mortgage Insurance (PMI) which is applied to loans that have less than a 20% down payment and adds an additional cost to the loan for the homeowner. All of this would lower my monthly payment and give me extra money to either save or use as extra mortgage payments.
If you’re thinking about refinancing your mortgage, one of the first things to consider is why. There are many reasons for refinancing
Once you’ve selected your lender they will ask you for paperwork to start the process. Essentially refinancing is similar to getting a loan for an existing home. So be prepared to gather all of your financials, have your credit checked, and sign a bunch of paperwork.
How long you’ll be staying in the home. You’ll tend to see greater savings if you’re planning to stay in the house for several more years because you’re saving money each month.
You have a good credit score as that will impact the rate you get.
Make sure to do your research and do the math to determine if refinancing is right for you.
By refinancing I could get an interest rate that is a lot lower than for my original loan, so over the length of the loan, I’m paying more towards the principal and less towards interest. I could also drop the Private Mortgage Insurance (PMI) which is applied to loans that have less than a 20% down payment and adds an additional cost to the loan for the homeowner. All of this would lower my monthly payment and give me extra money to either save or use as extra mortgage payments.
Related read from my financial blog: How I Decided I Was Ready To Buy My First House
If you’re thinking about refinancing your mortgage, one of the first things to consider is why. There are many reasons for refinancing
- To get a much lower interest rate
- To shorten the length of your loan from a 30 year to a 20, 15, or 10 year. This helps with paying the mortgage off faster and paying less interest. My parents and grandparents did this several decades ago and have owned their homes free and clear for a good portion of my life.
- To remove the PMI from your loan if you’ve built up enough equity to qualify to do so.
- To switch from an ARM or Adjustable Rate Mortgage to a Fixed Rate Mortgage.
- To lower the monthly payment. This can put a few extra dollars in your pocket or allow you to make extra payments to the principal and pay off your mortgage earlier.
How to refinance
To get started with refinancing you’ll want to get a few quotes. A great place to start is to check with your current lender, your bank, and ask friends or family for recommendations.Once you’ve selected your lender they will ask you for paperwork to start the process. Essentially refinancing is similar to getting a loan for an existing home. So be prepared to gather all of your financials, have your credit checked, and sign a bunch of paperwork.
Related read: The Hidden Costs Of Buying A House
Tips/things to keep in mind
You will need to pony up money for the closing costs which include things like the application fee, credit report fee, appraisal fee, and title insurance premiums just to name a few. There are a few ways you’ll be able to pay for this which is having it added to the total of the mortgage or paying out of pocket.How long you’ll be staying in the home. You’ll tend to see greater savings if you’re planning to stay in the house for several more years because you’re saving money each month.
You have a good credit score as that will impact the rate you get.
Make sure to do your research and do the math to determine if refinancing is right for you.
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