If you’re looking to refinance your existing mortgage, a 30-year, fixed-rate refinance loan is one of the best options available to you. As a general rule, the fixed rates for 30-year refinance loans are lower than rates for other home loan types, which can help you to reduce your existing interest rate as well as the overall cost of your mortgage. Locking in the lowest interest rate possible on your refinance loan makes it possible for you to lock in savings down the road.
Finding Today’s Lowest Rates
To find today’s lowest fixed-rate, refinance mortgage rates, consult with a mortgage broker or loan specialist in your area. You can also find low-interest-rate refinance loans online. An experienced mortgage expert can evaluate your current situation, current interest rates, and general trends in the existing market to determine the best refinance loan product for you. With the right refinancing arrangement, you can reduce your monthly mortgage payments significantly, making it possible to restructure your finances, so they’re easier to manage.
Advantages of Refinancing
In addition to reducing your monthly payments, a refinance mortgage can reduce the amount you’ll pay for your home over the life of your loan. When you take on a 30-year initial mortgage or refinance loan, you pay more toward the interest than the principle for around 13 years. Lower interest rates shift this balance a bit so that you can keep some of the money that you currently pay in interest on your existing mortgage and potentially grow your savings.
Not only are 30-year, fixed refinance rates typically lower than other loan types, but they’re also stable. For example, a mortgage with a variable interest rate can increase drastically should financial and housing market conditions change. This kind of drastic change can cause your mortgage payments to become unmanageable, and you could lose your home as a result. With a fixed-rate refinance, your interest rate won’t change for the life of the loan, providing predictability and stability that can help you manage your finances.
As with any mortgage loan, refinance loan, or other financial arrangement, it’s important to evaluate the lender’s terms and conditions such as consequences for late payments and prepayment penalties. With all mortgage loans, be sure to confirm the amount you’ll need to pay for closing costs and factor in any other expenses to figure out if refinancing is the best arrangement for you.
Additional Pros and Cons to Consider
Here are some pros and cons of 30-year, fixed-rate refinance mortgages you may wish to consider as part of your decision-making process.
Pros:
- Planning for your future is essential, and refinancing your current mortgage to a 30-year, fixed rate loan can clear the pathway to greater financial stability. The lower rate can free up income for you to put in a savings account, pay expenses such as college tuition, or pay down credit card debt.
- Having a fixed-rate loan insulates you from market fluctuations. If interest rates go up, you still get to enjoy the lower rate. Should rates fall, you can refinance to a lower-rate loan again.
- As a general rule, the less you owe on your mortgage, the more equity you have. So, you may end up with more equity in your home if you refinance to a lower rate.
- You can still benefit from tax breaks that allow you to write off some of your mortgage interest.
- Should your financial situation improve dramatically, you can pay off the loan, even if it’s a refinance product.
Cons:
- Refinancing your mortgage is never free. Either you pay costs upfront in cash, or the lender wraps up the costs into your new loan. Either way, each time you refinance, you have to pay to close the loan, and these costs can add up over time.
- If you’re unable to pay off your mortgage before the full term, you’ll pay a significant amount of interest over 30 years no matter how low your rate. If you borrow $200,000 for a home purchase at a 3.5% fixed interest rate, for example, you’d still end up paying more than $123,000 in interest.
Before Refinancing Your Mortgage
It’s a good idea to consider whether refinancing your mortgage is worth your while. Paying the cost of refinancing your home makes the most sense when you’re planning on living in the home for a few years. Closing costs usually amount 2% of the loan. If you know you’re going to sell and move, you may be better off taking pricing your home correctly so that it sells fast.
You also want to make sure that you have the financial profile to get your refinance loan approved. Ensure that all information on your credit report is correct and that you have a good credit score. You also need to have a stable job. Having money in savings also increases your chances of getting your loan approved.
Consider plugging some numbers into mortgage refinancing calculator to get a feel for how much your housing payment will go down. This gives you a sense of whether refinancing is worth it in your case. Compare the amount of interest you pay now to how much of a reduction you may get. Remember that the IRS allows you to deduct mortgage interest. The taxation agency also allows you to take a mortgage interest credit if you qualify as a low-income earner. You get the cost savings annually when you file your income taxes rather than monthly, but these still indirectly reduce your new mortgage payment.
Take time to research your options and talk with several lenders. Rates and closing costs vary significantly among lenders, so you don’t want to jump at an offer until you know it’s the best one available to you. You can talk to you current lender first, but don’t hesitate to shop around. Talk to loan officers at banks, mortgage brokerage firms, and credit unions in your town, and to online lenders to ensure you get a deal that will be financially beneficial to you.