Refinancing your current mortgage can be a terrific way to save a fortune on your home mortgage. Getting better terms can equal big savings over the life of your loan. Whether you secured your current mortgage in the last 12 months, or in the last 12 years or more, chances are things have changed that could allow you to refinance at a better rate or terms.
Before deciding whether to refinance, it’s important to understand how you can benefit from it. You’ll want to know how much money you can save in the long run, the length of the new loan, your new monthly payment, and the cost for fees and closing the new loan.
All of this is going to take you some time and effort, but it could pay off handsomely. Here’s an example: If you have a $200.000, 30 year mortgage at 7.25 percent, your total interest would be just over $290.000. With even a slight drop in interest to 6.75 percent your total interest would decrease to just under $267.000. That’s a savings of $23.000 over the life of your mortgage.
The first step in determining whether refinancing is worth it for you is to request several rate quotes from a range of mortgage lenders. By getting 3 to 4 rate quotes you can crunch the numbers and see how much money you can save. Most mortgage lenders will be more than happy to give you an analysis of your current mortgage versus a new one.
One thing you want to be sure to check for is a prepayment penalty on your current mortgage loan. Your mortgage may have a prepayment penalty built in to discourage you from refinancing, after all your original lender is making their money by you staying with their loan.
Having a discussion with a few mortgage lenders will cost you nothing but a little time. Sure, some may not be to your liking, but those are the guys you don’t want to do business with anyways. If you’re not totally comfortable, just say good-bye. The good news is… You could save a fortune!