Is it Wise to Refinance Your Glenview Home?

You may be thinking about refinancing your loan on your Glenview home. I mean, why should you miss out on the record low interest rates, right? However, before you refinance, make sure you are not the type of homeowner who is better off keeping your higher rates.

If you fall under any of the categories below, refinancing could actually be a bad financial move and it would be wise to consult someone before doing so.

You have had your same mortgage loan a long time
If you have been in your Glenview home a long time with the same loan, chances are you have reduced the amount you owe substantially by paying down on the principal instead of just the interest. However, by taking out a new loan, you will once again only be paying on the interest and the principal will not decrease.

If you have been in your home for more than half of a 30-year loan, you are more than half-way paid off. While refinancing may lower your payments, the amount of time you will be paying on that loan will increase significantly. For example, if you only have 10 years left on your current loan, you need to consider if it’s worth saving a few hundred dollars a month to increase your payment time to another 30 years.

Lower payments will not affect your life
If you are comfortable with your mortgage payment now, why go through the trouble of refinancing to reduce by just a few hundred dollars. Instead, pay a little more each month on your current loan to pay down your principal faster and reduce the amount of loan payments. "Mortgage repayment is a risk-less investment that yields a return equal to the interest rate on the repaid loan," notes The Mortgage Professor Jack Guttentag on his website.

You will be selling your Glenview home soon
If you know that in the near future you will be selling your home, it may not be worth spending all the costs that go with refinancing a loan: closing costs, appraisals, fees and points, which can add up to anywhere between $2500 and $5000. Although you may save $150-$300 a month on your loan payment, it will take you 5-7 years to recoup those expenses, and if you know you will have to sell in the next year or two, it may not be worth the trouble or cost.

While rolling the closing costs into the loan saves you out-of-pocket immediately, it only increases your loan amount, and you are paying interest on that amount for the life of the loan.

The Marla Schneider Team can help you determine if a refinance is the option for you, especially if you are looking to sell your Glenview home soon. We can determine what your home is worth, if it’s viable to sell your home right now or smarter to wait for an increase in home values.