How to Save Money with Mortgage Refinancing

If you are currently in a traditional fixed rate mortgage, it can be frustrating to see interest rates lower than the one on your current loan. Fortunately, it’s possible to take advantage of lower interest rates and effectively reduce your monthly payments through mortgage refinancing. When you refinance a home loan, you obtain a new loan to pay off your original home loan. However, mortgage refinancing may not make sense for everyone, so be sure to understand all the fees and terms associated with the refinance before you apply.

Benefits of mortgage refinancing
When you choose to refinance a home loan, various benefits may be available to you. The most commonly sought-after benefit of refinancing a mortgage is a lower fixed interest rate that will reduce monthly payments. Or perhaps you’re currently in an adjustable rate mortgage and want to take advantage of the security and stability offered by a lower, fixed interest rate. This also can be achieved through home refinancing.

It’s important to remember that home refinancing can extend the term of your loan. For example, let’s say your original loan was for a 30-year term and you’ve made payments on it for 15 years. If you choose another 30-year term when you refinance your home loan, you will have 30 more years of payments, instead of 15. However, your monthly payments will be lower and easier to afford. In the long term, however, you will pay more in interest.

Various terms, such as 15, 20 and 30-year loans, are available when you refinance a mortgage. If you can lock in a better interest rate and afford the higher monthly payments, you can shorten your amortization period and refinance your home loan to a 15-year term. This potentially could save you hundreds to thousands of dollars in interest over the term of your loan. You can use this savings to quickly increase the equity in your home by applying it toward the principal on your loan, or using it for a new car, college tuition or emergency fund.

Costs of mortgage refinancing
When considering home refinancing, it is important to decide how long you plan to stay in your current home. Will it be long enough to recoup the refinance costs? If you plan to stay in your home for more than a few years, then refinancing a mortgage may be a good choice for you.

Generally speaking, you also should be prepared to pay between 3 and 6 percent of the outstanding principal in refinancing fees. Some examples of the fees you can expect to pay are the application, loan origination, appraisal, inspection and closing fees. It’s worth speaking to lenders about these mortgage refinancing fees because sometimes they will waive a few of them and you can save money.

In addition, your credit history can have an effect on the cost of your home refinancing. The better your score, the better the interest rate you may be eligible for - and the more money you can save.

Depending on your circumstances, refinancing your home loan can save you money. If mortgage refinancing seems like a viable choice for your financial situation, you will want to find an attractive home refinancing rate from a lender you can trust, such as Nationwide. Visit nationwidebank.com today!