With the market being so hot for refinancing opportunities, you may be going over Extra Mortgage Payments Vs Refinancing in your head and trying to calculate which is better for you. If you don’t know for certain which method is best for you, hopefully this article can clear it up for you.
No matter your reasons for refinancing, for the sake of this argument we are only going to consider an interest rate reduction refinance as an alternative to making extra mortgage payments on your current loan. There are a few main reasons to look into a refinance when you are figuring out Extra Mortgage Payments Vs Refinancing. When refinancing there are 3 main items to keep in mind and that is the amount of the interest rate reduction, the new term of the loan AFTER refinance, and the costs/fees associated with the refinance and if this will be out of pocket or rolled into the new loan. What you are going to need to figure out is the incremental decrease in payment is going to offset the rate of return you would have gotten on your money by paying down your mortgage earlier. If you think about it, the extra funds that are going towards your mortgage could be invested elsewhere and you could be seeing a return on your money. You could be investing in a savings account, C.D., in the stock market, or with mutual funds. You can also think about it like this, if you are paying off a mortgage at 4% interest rate, then the additional money you are paying towards that mortgage is getting a 4% return on the money. If you can’t make at least 4% return on your money from investing then you should consider paying off your mortgage instead. As you can see, Extra Mortgage Payments Vs Refinancing is a tricky subject that you really need to think about.
As another example of Extra Mortgage Payments Vs Refinancing you can look at the following situation and see what choice would be best. Let’s say for example a borrower has the means by their own assets to pay off their mortgage completely or refinance to a lower rate and keep the mortgage, what should this borrower do? Let’s say you are able to get a 4% return on your assets and your refinancing interest rate is 3.5%, then it definitely makes sense stick with the refinance as the 4% return on assets is greater than the 3.5% interest rate of the new loan.
As you can see, Extra Mortgage Payments Vs Refinancing is a tricky slope if you don’t know what you are doing or aren’t working with a professional in the industry. You need to have a loan officer you can trust who has the knowledge to look into the entire scenario and not just the refinance. This is where I come into play, with a finance background I can look at your situation in totality before making a suggestion on how to proceed. If you are in this situation, please give me a call ASAP at 888-900-1020, email me at firstname.lastname@example.org, or visit www.loanconsultants.org for more information.