Is Mortgage Refinancing a Smart Option?

Thanks to historically low interest rates, refinancing is all the rage. Before refinancing your mortgage though, you should think long and hard about whether it’s really the right time to do so. A few considerations to make before refinancing your new home in Chicago mortgage are highlighted below.

How Long Will You be in Your Home?

If you’ll save $100 a month by refinancing, for instance, it would take you 30 months to recoup closing costs in the amount of $3,000. If you’re not going to be in your home for at least three years, it’s probably not worth it.

Will You Really Save on Interest?

Calculate how much interest you will pay on your current mortgage, and then calculate how much interest you will pay by refinancing it. You may discover that you’ll ultimately pay more by refinancing. However, if you are desperate to get a lower monthly payment, it may still be the right thing to do.

Will You Have to Pay a Prepayment Penalty?

Before you get serious about refinancing your mortgage, check to see if you’ll have to pay any prepayment penalties. If you do, the added expense could tip the scales in favor of sticking with your current mortgage.

Are You Underwater on Your Mortgage?

If you currently owe more than what your home is worth, you are underwater on your mortgage. Securing good refinancing terms under such circumstances isn’t easy. You might want to wait until home values go up again because any savings that you get will be negligible.

The bottom line is that you shouldn’t rush into refinancing your mortgage. It’s not always the best course of action, so be sure to evaluate all of your options before moving forward.

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