When refinancing a mortgage, costs can be categorized into one-time costs and ongoing costs. These costs can play a significant role in determining whether a refi is a financially viable option.
One-time costs needed for your Cash to Close may include:
Ongoing costs can include:
Refinancing your mortgage can provide significant benefits, but it may not be the right decision for everyone. To decide if it is worthwhile, you need to carefully assess long-term savings, consider your financial objectives, and understand your break-even point.
You can lower your interest rate and decrease your monthly mortgage payments with a refinance, freeing up funds for other expenses or savings. In the long run, it can lead to significant savings, sometimes totaling tens of thousands of dollars over the life of the loan.
When deciding to refinance your mortgage, it's important to align it with your broader financial goals. If you currently have a 30-year mortgage, you might want to consider refinancing to a shorter term, such as a 20 or 15-year loan. Although choosing a shorter term will increase your monthly payments, it will also reduce the overall amount of interest you'll pay and help you build equity faster. This can be especially beneficial as you approach retirement or other financial milestones.
Consider refinancing to switch from an adjustable-rate mortgage to a fixed-rate mortgage. This can offer more stability in your monthly payments. It may be especially beneficial if interest rates have decreased recently or if you expect them to rise in the future.
A cash-out refinance allows you to tap into the funds you've built in your home, borrowing against its equity to receive a lump sum of cash. This cash can be used for various purposes, such as home improvements, debt consolidation, or other major expenses.
One important calculation to consider when thinking about refinancing is finding the break-even point. This is the point at which your savings from the new loan will be greater than the costs of refinancing. For instance, if your refinancing costs are $4,000 and you'll save $200 per month with the new loan, it will take 20 months to break even. If you don't plan to stay in the home for more than 20 months, then the cost of refinancing may not be financially advantageous.
Improving your credit score before refinancing can significantly lower your interest rate. Borrowers with higher scores typically qualify for lower interest rates, which can reduce the overall cost of the loan. Even a small improvement in your credit score could save you thousands of dollars over the life of your mortgage.
Currently, Standard Mortgage offers discounted closing fees on refinance transactions to our current customers.
If you're thinking about refinancing your mortgage, the experienced team at Standard Mortgage is here to guide you every step of the way. With over 90 years of expertise, we've been dedicated to helping homeowners successfully navigate the complexities of buying and refinancing their homes.