Is it a good idea to refinance your mortgage in Denver? There is no one answer to this question. Refinancing can save you a lot of money—but it can also cost you money depending on your situation.
Why do some homeowners choose to refinance their mortgage?
- To get lower interest rates
- To shorten their mortgage term
- To switch from ARM (adjustable-rate mortgage) to a fixed-rate mortgage (or the other way around)
- To use some of their home equity to cover a financial emergency, consolidate debt, or fund a large purchase
Refinancing costs anywhere from 2% and 5% of the principal. Just like the original mortgage, it requires an appraisal and involves application fees. This is why it’s important to do the math to see whether refinancing makes sense financially in your case.
One of the best reasons to refinance your mortgage is to get a mortgage with lower interest rates—lower by at least 2%, ideally, though some experts say that even 1% is good enough of an incentive. So when interest rates drop, think about refinancing so you can shorten your mortgage term and pay a lot less in interest.
Switching from a fixed-rate to an adjustable-rate (or vice versa) may make sense financially, too, depending on two factors: the rates and how long you plan on living in your current house.
You can also refinance your mortgage in Denver to tap your equity or consolidate debt but beware. This can backfire and worsen your debt problems. It will take quite a few years to recover the refinancing costs, so don’t do this unless you are sure that you are staying in your home for the foreseeable future.
It’s best to seek advice from a mortgage advisor to figure out if it makes sense to refinance your mortgage.