How to Save Money on Your Mortgage Through Refinancing
With mortgage rates on the rise, many homeowners are exploring options to reduce housing costs. Refinancing can provide meaningful savings, but only if done strategically.
Let's go through the best practices for ensuring your "free" mortgage refinance actually saves money.
Lower Interest Rates Aren't the Only Path to Savings
Today's higher interest rates mean lower monthly payments are no longer the primary motivation for refinancing. However, two overlooked benefits make refinancing worthwhile for some:
1. Shortening Loan Term
By refinancing into a shorter loan term, you can build equity faster and reduce total interest paid over the life of the loan. This strategy works even at higher rates.
2. Ditching Mortgage Insurance
If you've built enough home equity, refinancing could allow you to cancel mortgage insurance (PMI/MIP) and pocket those savings each month.
Run the Numbers Carefully
Work closely with your lender to model multiple scenarios and pinpoint breakeven points. Understanding the costs and run potential savings calculations will ensure any refi makes solid financial sense.
Explore Down Payment Assistance Programs
Several state and local programs provide down payment and closing cost assistance for qualifying buyers, making refinancing more affordable.
Learn more about these little-known options.
The Bottom Line
A "free" refinance can still pay off in today's environment. Arm yourself with information to ensure your specific situation pencils out.
Refinancing remains a powerful tool for building long-term wealth, when applied strategically.