Low mortgage rates have been in the news lately, making the option to refinance all the more appealing. Homeowners are eager to lock in these lowered home loan rates not only to save money their monthly payments but also have additional funds to invest or save for life's emergencies.
With advantages as enticing as these, you may also be eager to refinance. You may be wondering if it's a good idea to refinance to a 30-year loan.
When you refinance to a new, 30-year loan, it's likely that your payments will be lowered since the loan amount is spread out over a greater number of years than the current loan. However, it also means paying more over the long term because the interest is applied over a longer period.
Advantages of refinancing to a 30-year loan instead of keeping the same term
The main benefit of refinancing to a 30-year loan is that you'll be able to secure a low refinance rate for long term. Not only does this option save you money, but it also frees up money that you can put to work in long-term investments. Locking in your lowered rate also protects you against inflation, guaranteeing that your mortgage payment remains unchanged over the next 30 years.
Disadvantages of changing your loan terms
The drawback of taking on a new, 30-year mortgage is that you'll pay more interest over the cost of the loan. However, even this drawback is not as clear-cut as it may seem. After taking into account the compounding interest, the money you have available to invest at the lowered mortgage rate can earn more over the life of the loan than the additional mortgage interest will cost you. You'll also have freed up funds available to you in an emergency.
Another possible disadvantage is that some 30-year mortgages have a higher interest rate than your current term.
Is refinancing in your future?
There's much to consider when you're thinking about refinancing. Refinancing can be a great way to reduce your mortgage payment, adjust the term of your loan, or even free up money for investing or for emergency purposes.
Having a trusted mortgage professional with your bottom line in mind will help you make an informed decision. A knowledgeable mortgage
Find out if refinancing makes sense for your particular situation. We take a careful look at your current financial standing, your long term goals, as well as match you up with a loan program.
Call our office today to learn more.