If you are interested in lowering your mortgage payments, then refinancing may be a service you should consider. In this article we are going to cover what exactly refinancing is the advantages, costs, why you should refinance, and finally, how to get started on your refinancing process.
What is Refinancing?
Refinancing is an overarching strategy that helps the borrower reach their financial goals. Its most basic definition is to give the borrower a completely new mortgage. This new mortgage will have different rates and different terms included in the agreement. Before you decide right now that this is exactly what you want to do, it is important to understand the pros and cons of refinancing.
Costs of Refinancing
As with almost any good thing, refinancing does have a cost. In this case, there are several monetary costs that you may incur when refinancing. When you buy a home, it is common to incur closing costs. When you refinance your loan, you are essentially starting over the mortgage process and will have to pay closing costs again. These refinancing closing costs cover a wide range of fees that can total several thousands of dollars very easily. The main risk of refinancing is that you may not recoup your closing costs, particularly if you don’t stay in the home for very long after refinancing.
Benefits of Refinancing
Although there are negatives to refinancing the main focus is the good that may come from refinancing. The number one reason why homeowners choose to go through this process is to get a lower interest rate on their mortgage. This lower rate will, in turn, reduce their monthly payments and they will pay less for their home overall. This saved money each month can be put toward saving for long or short-term financial goals.
Another benefit is you will be able to pay off your debt sooner if you choose to refinance from a 30 to a 15-year mortgage. You will also be able to build equity sooner if you choose to go this route.
To summarize, there are pros and cons to refinancing. The con being the costs associated and the pros being the savings on recurring payments. The only way to decide if refinancing is right for you is to run the numbers based off of your current loan agreement. Bank of Bozeman offers refinancing right here in Bozeman. If you are interested in this service or need help seeing if it is the right program for you, contact one of our agents today.