Refinancing vs. PrepayingPosted on 03/22/14
Is there a difference between making extra mortgage payments and refinancing your home? Determining that depends primarily on your individual situation. However, understanding the differences will help in your decision process.
Prepaying your mortgage typically requires you pay a little extra on your loan each month. Doing this has the potential to save you thousands of dollars interest over the life of the loan
On the other hand, getting a new mortgage to replace the original is called refinancing. This will allow you to obtain a different, sometimes better interest rate and term.
The question now becomes should you refinance or prepay? The answer rests on your goals. Your ultimate goal is obviously to pay less to the lender, which can in all actuality be achieved by both. It is a matter of choosing between lower monthly payments or paying off your mortgage as soon as possible. If the first better fits your loan situation you may want to consider refinancing, likewise the latter is probably better suited towards prepaying.
It is important to do what makes financial sense for you. It may even make sense to refinance and then make prepayments on your new, lower interest loan. For more about your financing options, contact Kerry Veach at 850-837-1880.