Factors to Consider When Refinancing

When you buy your home, it may not always be under the perfect circumstances. Your credit may not have been good enough to qualify you for the best interest rates. You may not have had the down payment you wanted. You may taken on more than you could really afford in your enthusiasm to own your first home.

Refinancing can be the answer for many homeowners trying to balance their budget and meet their financial goals. In some cases, it can save you hundreds of dollars a month. However, it is not always the most appropriate solution. It's important to understand the pros and cons to ensure that you make the right decision for your personal circumstances.

Considering a Refinance?

Interest Rate Changes
If general market interest rates have declined or if your credit profile has improved, you may qualify for a lower interest rate. A reduced interest rate can potentially lower your monthly payment and the total amount paid over the life of the loan.

Switching Loan Types
Some borrowers refinance to transition from an adjustable-rate (ARM) to a fixed-rate mortgage to achieve more payment stability. Others may refinance to consolidate a first and second mortgage into a single loan, simplifying their monthly payments.

Accessing Home Equity
Cash-out refinancing allows qualified homeowners to access a portion of their home's built-up equity. Funds from a cash-out refinance can be used for various purposes, such as debt consolidation, home improvements, or other financial needs. Loan terms and rates may vary based on the amount borrowed and borrower qualifications.

Shortening the Loan Term
Refinancing into a shorter loan term can help borrowers pay off their mortgage sooner. Although monthly payments may be higher, borrowers may reduce the total interest paid over the life of the loan. Shorter terms may align with financial goals such as preparing for retirement.

When It Might Be Best to Wait

Refinancing isn't always the best option. It typically involves costs similar to those paid with an original mortgage, such as appraisal fees, title insurance, and other closing expenses. While some fees may be redced or waived in competivie situations, refinancing can still lead to higher total finance charges over the life of the loan.

Before proceeding, it's important to weight your potential monthly savings against the upfront costs and estimate how long it will take to break even. If you don't plan to stay in your home beyond the breakeven period, refinancing may not provide the expected benefits. Additionally, some existing loans may include early repayment penalties that should be considered.

Using the provided calculator can help you estimate costs and evaluate if refinancing aligns with your financial goals. Results are illustrative only and will vary based on individual circumstances.

 

Calculator Disclaimer

This calculator is intended for illustrative purposes only and are hypothetical. We do not guarantee the accuracy of any calculation results scenarios. The figures displayed do not constitute an offer, quote, or solicitation of a product or service by AmWest Funding Corp or its affiliates.