Mortgage Restructure and RefinancingFrom taking advantage of lower rates to shortening the term on their mortgage, there are many reasons why people refinance a mortgage. Refinancing a mortgage means paying off the existing mortgage and replacing it with a new one. This can allow you access to funds you may need or a loan for a new large purchase.

In Utah, according to mortgage expert Altius Mortgage Group, mortgage refinance is readily available with accredited mortgage companies. However, before you pick up the phone, you need to understand the right time to refinance your mortgage. Here are some things you need to know about mortgage refinancing.

Reasons for Refinancing

A drop in rates is one of the most popular reasons to refinance your mortgage, especially if you are locked in a fixed-rate mortgage. But before you decide to refinance, keep in mind that a new loan means new closing costs. A general rule of thumb is the longer you plan to stay in your home, the more likely you should refinance.

Another reason to refinance is an improved credit score. Lenders calculate your mortgage interest rate based upon your credit score. If you started your mortgage with a high rate, developing better financial habits could help you get a better credit score, thus improving your mortgage rate.

Cash-out refinancing is also another way to get more money out of your property. Through cash-out refinancing, you can apply for a larger loan and use the extra money for things you may need.

Matter of Time

Knowing when to refinance is also as important as knowing why. This is where your mortgage’s break-even point comes in. The break-even point is the time it will take for the mortgage to start paying itself. This way, you can see if refinancing is a reasonable option for you.

To calculate for the break-even point, divide your total closing costs by your monthly savings. If you plan to stay in your property for the amount less than your computed break-even point, then mortgage refinancing may not be the best option.

Refinancing a mortgage may seem enticing at first, but looks can always be deceiving. Remember to take the time to consider the pros and cons so that you can come to a decision that’s right for you.

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