With mortgage rates at record lows it’s tempting to refinance your home loan. But should you? Here are some good reasons to consider taking the plunge!
- Lower Your Interest Rate: Lowering the interest rate on your home loan significantly will let you pay it down more quickly and pay less interest over the life of the loan. It’s important to consider whether you’ll have the loan long enough to make up for any costs you might roll into the new loan. For example, if you’re thinking about moving in the next couple of years it probably doesn’t make sense.
- Leveraging Your Equity: If you have built up some equity in your home, whether from paying it down, the value going up, or a combination of both, you can use that equity to wrap higher interest debts like credit cards into your home loan to pay off at a much lower rate.
- Lower Your Payment: Even if you haven’t built a lot of equity, but you can lower you payment significantly, you can dedicate those monthly savings towards paying down your higher interest debts more quickly. This is a great way to accelerate the “debt snowball” strategy.
So when might it make sense to pass on a refinance? If you’re planning to move in the next couple of years you probably won’t have enough time to get back any costs sunk into the refi back out. Lack of discipline is another good reason, if you lump your credit card debt into your home loan only to charge up your credit cards again you haven’t helped yourself at all.
Curious about whether a refinance might improve your situation? Email or call Amy Clark, PCCU’s home loan expert at 765-960-8618. She will answer your questions and help you decide if a home loan refinance is right for you.