(636) 898-0888 Toll Free: (877) 456-2900
Have you been considering refinancing your Chicago home? Maybe you’re hoping to reduce your monthly mortgage payments or get access to some extra cash; but before you make any moves, there are some important things you need to know first. Let’s take a look at why it might be time to refinance your home and what you should consider before doing so. It’s important to understand the pros and cons of refinancing before making that big decision.
What Is Refinancing?
First of all, let’s define what refinancing is. When you refinance, you essentially replace your current loan with a different loan with different terms (such as an interest rate or repayment period). The goal of refinancing is usually to get a better deal on your loan, such as a lower interest rate or a faster repayment schedule, so that the total cost of the loan is reduced over time.
When Should I Consider Refinancing?
If rates have dropped significantly since when you first took out your loan, it could be a good time to consider refinancing. For example, if rates have dropped by at least 1%, or if they’ve dropped by more than 0.5% and you plan to stay in the home for several years, it could be worth considering refinancing. It’s also worth exploring if your credit has improved since taking out the loan, as this could qualify you for a better rate. It could also make sense to refinance if you want to make the switch from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage (FRM).
An ARM can mean larger payments down the line if rates rise; however, an FRM offers some peace of mind as the same payment will remain for the duration of the loan, no matter how high interest rates go up later. It’s also possible that refinancing could help shorten the length of your loan term. If reducing your monthly payments isn’t enough incentive for you, then shortening the length of time it takes to pay off the mortgage may be enough motivation! Finally, refinancing may be beneficial if there are other deals available that don’t require private mortgage insurance (PMI). PMI can add hundreds of dollars onto each monthly payment; however, certain lenders offer loans without PMI, which can save homeowners money in the long run.
Refinancing your mortgage can be a good way to reduce costs and improve financial security over time, but it’s important for you to do your homework before taking out another loan on your property. Researching current rates and comparing them with those offered by other lenders is essential. Additionally, understanding how long you plan on staying in your current home and what type of payments you’re comfortable making are both incredibly important considerations when deciding whether or not refinancing is right for you. By weighing all these factors carefully against each other and consulting with local experts who specialize in mortgages and loans in the Chicagoland area, you should have no problem finding a solution that works best for you financially.