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Guide to Refinancing Your Mortgage

1 (2)Homeowners near and far are likely struggling with the decision of whether or not to refinance their mortgage. Before you can decide if this is the right choice for you, it is important to understand the basics.

For starters, refinancing means getting a new mortgage for your Destin, Florida real estate, to replace your original mortgage. What’s the goal of refinancing though? To obtain a better interest term and rate. Typically, for borrowers with a perfect credit history, refinancing can be a good way to convert a variable loan rate to a fixed one. For those with less than perfect credit, it can risky.

To make things a little more difficult, there are actually two type of refinances to take into consideration. The one mentioned earlier, which is is rate-and-term refinancing and then there is cash-out refinancing. Cash-out refinancing is taking out a new mortgage for more than you previously owed, which will leave you with some positive cash flow. The difference is usually used to pay off of an existing debt.

So, does it make sense for you to refinance? Keep in mind that mortgage closing costs can total thousands of dollars. You need to find a “break-even” point to answer the question: “Should I refinance my mortgage?

The break-even point is the time it will take for the mortgage refinance to pay for itself. You can calculate this yourself, dividing the total closing costs by the monthly savings. If you plan to keep the house for less than the break-even time, it is generally advised that you stay with your current mortgage.

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