Are you looking for a way to lower your monthly mortgage payments? Refinancing your home loan could then be a better option for you. Refinancing involves replacing your existing mortgage with a new loan program. It works similarly to your first mortgage but you simply choose to work with a different lender who is offering a lower interest rate. You need to make sure to research your loan options before submitting a mortgage refinancing application for approval.
Benefits of Mortgage Refinance
There are numerous benefits of refinancing your mortgage. It not just significantly brings down your monthly payment towards your loan but also lowers the length of your loan. Refinancing also lets you switch from an adjustable-rate mortgage to a fixed-rate loan. With an adjustable-rate mortgage, your payments can go up or down as when the interest rate changes.
Switching to a fixed-rate loan ensures stable and reliable monthly payments to homeowners. Also, if you have been paying a higher interest rate, you can benefit from the current slash in the interest rates by opting for refinancing. You can also simplify your finances and focus on a single debt by consolidating your first mortgage and your home equity line of credit. This can help you save money in the long run.
Changes in the Current Refinance Rates
If you have been looking to lock in a good interest rate, then now is the perfect time to refinance your mortgage. There have been dynamic changes in the refinance rates in recent months and you can benefit from it if you can plan it well.
As an example, the 30-year fixed-rate mortgage, which was around 4% in 2019 kept falling through 2020 and is in the low 3% range currently. Consequently, anyone with a running mortgage from 2019 or earlier can save hugely simply by refinancing their mortgage.
30-year fixed refinance rates
The current average interest rate is 3.14% for a 30-year refinance. Refinancing to a 30-year fixed loan can certainly lower your monthly payments. It can be a good option for those looking to reduce their monthly payments.
15-year fixed-rate refinance
The average interest rate for 15-year refinances currently is 2.43%. If you are planning to refinance from a 30-year fixed loan to a 15-year loan, then it will likely shoot up your monthly payments. However, it will save you more money over time as you will be paying off your loan at a quicker rate.
For example, consider someone paying a 3.41% fixed-rate mortgage (as per 2017 rates) on a $150,000 mortgage loan. Their monthly payment is around $1,065.
Using a simple mortgage calculator, we can deduce that if the same person refinances at the current rate of 2.43%, their monthly payment would be $995, which translates to savings in interest of $70 monthly, or over $12,000 over the loan term.
10-year fixed-rate refinance
The average refinances rate of a 10-year fixed loan currently is 2.41%. A 10-year refinance will have the highest monthly payment but with the lowest interest rate. You can pay off your debt much quicker and also save on interest with this refinancing solution.
However, be sure to analyze your current financial situation as well as your budget to ensure that you can afford the higher monthly payment.
Finding the best refinance rate
The interest rate will always be influenced by your credit history as well as with the prevalent marketing conditions. To benefit from the best refinance rates, make sure that your application is strong enough. Try to improve your credit rating by managing your finances carefully.
If you are not good with financial calculations, then you can use a handy tool such as a mortgage calculator to compare mortgages and decide whether you need to refinance your mortgage or not. Carefully weigh the pros and cons to make sure that the move to refinance would benefit you or not.