Refinancing your mortgage: when and why should you do it?

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Mortgage

The concept of ‘Refinancing a mortgage’ is to pay off an existing loan and replacing it with a new one.

When should you refinance your mortgage?

There are many different situations where you should consider refinancing:

  1. The opportunity to get a lower interest rate
  2. The chance to shorten time period of the mortgage and vice versa
  3. The desire to convert from an adjustable-rate mortgage (ARM) to a fixed rate mortgage, or vice versa
  4. To remove the other person’s name from the loan in case of a divorce

How is PMI calculated on a refinance?

mortgage refinance

PMI (Private mortgage insurance) is a cost typically calculated from 0.5% to 1% of the entire loan amount, which is paid on annual basis in order to reduce the interest rate.

For example, if the loan amount is $100,000 then the homeowner is supposed to pay $1,000 per month (assuming a 1% PMI fee).

How do you refinance your home?

Once you are sure and have determined it’s the right time to refinance, using a mortgage refinance calculator can help you to get the best deal. All you need to know is the fees you’ll pay, your new interest rate and your new loan amount. Working with a refinance calculator is one the best decision as it will give you an idea of what to expect.

How do I know if I should refinance my mortgage?

This is a tricky question as you are not sure whether refinancing makes financial sense or not. How much of a monthly payment are you planning to pay? How much time will it take to pay off the loan or can you afford to shorten your loan term? If you decide to stretch out your mortgage to a longer term, will that cost you more? These questions are quite obvious and can be simply resolved by using a Refinance Calculator.

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