Your mortgage can easily be your biggest monthly expense. Depending on your situation, you may be able to reduce that burden by refinancing your mortgage.
It’s not complicated, but it takes time to get it done so it’s smart to go over the numbers and see if it the right move for you.
Reasons to Refinance Your Mortgage
Refinancing is a basically replacing your current mortgage with more favorable terms and rates. Some practical reason to want want to refinance include:
Lower Interest Rates: You can drastically reduce the amount of interest you pay over the term of mortgage. That money saved can be used for other financial goals, like investing or starting a business.
Lower Monthly Payment: Refinancing can help you if you’rd on a tight budget. Please keep in mind that there are closing costs to consider (though it’s possible with some lenders to roll them into the new loan). For those with 20% or more equity, you may want to refinance to not only save money on interest, but to also get the PMI remove. You don’t have to refinance to get the PMI removed though.
Pay off the mortgage sooner: Cutting down on the length of the mortgage can also save you a ton of money in the long run. The trade off is that you may have to pay just a bit more each month.
When we were looking to refinance years ago, we loved the idea of paying the lower interest rate. Any time you can save ten of thousands in interest payments it’s worth taking a look!
However there is more to the refinance progress that you two will need to talk about.
Should You Go Ahead Refinance Your Mortgage?
No one is going to care about your hard earned money like you do, so while it’s nice to have a lender run the numbers, you always want to do that yourself as well.
Interest Rates Between The Old and New Mortgages: You may feel that lower interest rate is automatically better, but you may not get much benefit. A small drop in your interest rate may mean that the refinance is more hassle than it’s worth. However if you can shave a percentage point or more you may be able to keep the same payments with your bill pay, but apply the difference towards your principle.
Proposed Mortgage Terms: Sometimes we forget that refinancing can reset mortgages to another 30 or 15 years (meaning plenty of your payments goes towards interest for those first few years), so it might not be prudent to jump into another one. On the other hand, if you have ARM mortgage, getting a stable fixed rate one can allow you two to plan your finances a little easier.
Estimated Closing Costs: This is another mortgage, so there will be closing costs. Some lenders will roll that into the new mortgage, but you still need to factor that in before you choose to move forward.
Once you two weigh these costs along with the benefits, you can then decide if refinancing is a good deal or if it’s better to hold off until another time.
If you decide to refinance, one of the biggest things you can do to save money is to shop around to make sure you’re getting the best rates.
If you have an older home, go ahead check all of your lights, you may need to switch more bulbs and fixtures than you think.
Tips for Buying More Energy Efficient Lights
When replacing your bulbs, here are a few things to keep in mind:
Take your old bulb with you. I have a hard time remembering the brightness of the bulb I’m replacing so to make sure you’re getting a good match go ahead and grab that old bulb. You also want to make sure you get the right ‘warmth’ or ‘cool’ tone with your light.
Check with your power company and see if they offer rebates. Save more money and take advantage of rebate programs your utility provider may offer.
Keep receipts. Got a bad bulb? If it’s an Energy Star bulb, you may be covered under a warranty.
When deciding on CFL or LED, please keep in mind that even with prices dropping on LED bulbs, it can be expensive if you’re buying large quantities. You may want to go with compact fluorescent for now.
On the other hand, when you do dispose of CFLs, you need to recycle them as they have a tiny amount of mercury.
If you’re looking for more helpful information, Consumer Reports has plenty of articles. (Some require a subscription):
Congrats to Kristy for winning June’s $20 Date Night Challenge!
New month means there’s a new contest. For July, our social contest is Home Smart!
Share your money saving tip to help others on Twitter, Facebook, or Instagram and use #homeSmart. Like last month, once I confirm you’re a Couple Money Newsletter Subscriber, you’ll be entered for a chance to win $100 (Paypal or Amazon Gift Card).