When money gets a little tight, you may wonder whether you can help your budget by refinancing your home. While refinancing can lower your monthly payments or reduce interest rates, it’s not always the right decision. Let’s look at the three key things to know about selling and refinancing. Reasons To RefinanceYou probably know that refinancing means you’re trading in your current mortgage for a different one. Your new mortgage usually comes with a different interest rate and a new principal. Refinancing can help in several ways. If you want to pay off your mortgage more quickly than your current term allows, you can shorten your term. This increases your monthly payments but means you’ll pay them for fewer months. On the other hand, you can lengthen your term, thus reducing month-to-month costs. One of the most common reasons to refinance is to take a lower interest rate. If interest rates have dropped since you bought your home, you can refinance to reduce monthly interest, thereby paying less money in the long run. Closing CostsAn essential component of refinancing to remember is that you need to pay closing costs on your refinance. This is just like the closing costs when you purchased your home, and it’s usually two to three percent of your total loan value. While reduced interest rates help in the long run, you may not feel like you’re saving for several months due to the up-front closing costs you have to pay. You may have heard of a no-closing-cost refinance. While this deal sounds good, you don’t end up saving any money. That’s because the closing costs are added to the principal of your loan. You’ll pay off the closing costs eventually, in the form of slightly higher monthly mortgage payments. This option is helpful in the short term but offers no actual savings over time. If You’re Planning To SellWhile you can refinance your home and sell it immediately after, there generally aren’t enough benefits to counteract the closing costs. You should also keep in mind that finding a lender to work with you will be more difficult if you’re trying to refinance a home that’s already on the market. Your best bet to sell your house fast in Elgin is to contact us—we can help! Now that you understand these three key things to know about selling and refinancing, do the math and see what makes the most financial sense for you.
1 Comment
4/11/2022 04:35:05 am
Great deals of important information and the articles are great.
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AuthorEric Strung and Direct Property Buyer Team Archives
January 2024
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