When it comes to deciding if refinancing your home is a good idea or not there are a couple of things to consider. Let's go through some reasons why it might make sense to refinance your current mortgage.
1. Reduces your mortgage payment
Refinancing can be a good decision if it reduces your monthly mortgage payment. When it comes to saving money on a monthly basis the general rule is to reduce your current payment by 1% however, there is no right amount it all depends on your goals.
2. Debt consolidation
Many homeowners refinance to consolidate their debt. At face value, replacing high-interest debt with a low-interest mortgage is a good idea. Also, the interest on your mortgage is tax-deductible.
3. Shorten the term of your loan
Homeowners often take the opportunity to refinance their current mortgage when interest rates fall and without much change to their monthly payment but to have a shorter term.
4. Change your loan type
If you have a loan with mortgage insurance (MI) and you have built at least 20% equity in your home refinancing makes sense. You will be able to save money by refinancing into a new loan and possibly switching to a new loan program that fits your current needs.
Refinancing makes sense when it enables you to save money in the long- or short-term, or gives you the cash you need to either invest, make important purchases, or debt consolidation.
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