Refinancing your mortgage might not seem like a good idea in 2023, when mortgage interest rates have increased to levels not seen for about 20 years.
Depending on your financial circumstances, refinancing might still have some advantages. Here are some of the pros and cons of refinancing your mortgage.
Advantages of Refinancing Your Mortgage
There are several advantages to refinancing your mortgage, including:
- Changing the terms of your loan. If you want to change the terms of your loan, such as the interest rate or the loan term, you can do so when you refinance. This could give you more flexibility in your budget.
- Saving money on interest. If interest rates have gone down since you took out your original mortgage, you may be able to refinance at a lower interest rate. This could save you thousands of dollars over the life of your loan.
- Saving money over the long term. If you refinance to a shorter-term loan, your monthly payments will be higher, but you’ll pay off your loan sooner and save money on interest paid over the life of the loan.
- Reducing monthly payments. If you refinance to a lower interest rate, but the the same loan term, you could reduce the monthly mortgage payment and put some extra cash back into your pocket.
Disadvantages of Refinancing Your Mortgage
There are also some disadvantages to refinancing your mortgage, including:
- Closing costs. When you refinance, you’ll have to pay closing costs, which are fees associated with processing the refinance. These costs can add up, so it’s important to factor them into your decision.
- You may not save money. If interest rates haven’t gone down since you took out your original mortgage, you may not save money by refinancing. In some cases, you may even end up paying more in interest over the life of your loan.
- You may lose equity. If you refinance and take out a larger loan, you’ll have to start making payments on a larger amount of money. This could mean that you lose equity in your home.
When to Refinance Your Mortgage
Whether or not you should refinance your mortgage depends on your individual circumstances. If you can save money on interest or get a lower monthly payment, refinancing may be a good option for you. However, it’s important to factor in the closing costs and potential for losing equity before you make a decision.
If you’re considering refinancing your mortgage, talk to Barry Prior at Priority Financial Services. He can help you understand your options and decide if refinancing is right for you.