5 Benefits of Refinancing Your Home Loan – Nationwide (2024)

FAQs

5 Benefits of Refinancing Your Home Loan – Nationwide? ›

Common goals from refinancing are to lower one's fixed interest rate to reduce payments over the life of the loan, to change the duration of the loan, or to switch from a fixed-rate mortgage to an adjustable-rate mortgage (ARM) or vice versa.

Common goals from refinancing are to lower one's fixed interest rate to reduce payments over the life of the loan, to change the duration of the loan, or to switch from a fixed-rate mortgage to an adjustable-rate mortgage (ARM) or vice versa.

A general rule of thumb is that it makes financial sense to refinance your mortgage if you can secure a rate that's at least 1% lower than the one you currently have. During the pandemic, mortgage interest rates hit historic lows and a rush of homeowners were able to refinance with lower interest rates.

Refinancing allows you to lengthen your loan term if you're having trouble making your payments. The downsides are that you'll be paying off your mortgage longer and you'll pay more in interest over time. However, a longer loan term can make your monthly payments more affordable and free up extra cash.

Get a lower interest rate and monthly payment

And in many cases, a lower interest rate also means a lower monthly mortgage payment. This interest savings could allow you to pay off other high-interest debt, add to your savings account or put more dollars toward retirement.

Loan starts over: You'll be replacing your current mortgage loan—and any time you have left until it's paid off—with a brand new mortgage. Depending on how long you've had your current mortgage and how long your new mortgage will last, you're likely extending the amount of years you'll be making mortgage payments.

It's generally worth it to refinance if you can lower your costs in some way, whether by getting a lower interest rate, a shorter loan term, or a cheaper monthly payment. A lower interest rate means you'll have lower monthly payments compared to your existing mortgage.

Fortunately, you can refinance as often as it makes financial sense to do so. A mortgage refinance can help you manage your money more effectively as well as lower your interest rate, remove private mortgage insurance or take cash out of your equity.

With a cash-out refinance, you get a new home loan for more than you currently owe on your house. The difference between that new mortgage amount and the balance on your previous mortgage goes to you at closing in cash, which you can spend on home improvements, debt consolidation or other financial needs.

What should you not do when refinancing your home? ›

Refinance closing costs commonly run between 2% and 6% of the loan principal. For example, if you're refinancing a $225,000 mortgage balance, you can expect to pay between $4,500 and $13,500. Like purchase loans, mortgage refinancing carries standard fees, such as origination fees and multiple third-party charges.

You might want to consider refinancing your mortgage in 2024, especially if you got your mortgage in the last year and interest rates fall, or your specific circ*mstances call for a new loan.

Refinancing to lower your monthly payment is great unless you're spending more money in the long-run. Moving to an adjustable-rate mortgage may not make sense if interest rates are already low by historical standards. It doesn't make sense to refinance if you can't afford the closing costs.

A longer-term loan could result in lower monthly payments, but higher overall costs. For instance, if you have 10 years left to pay on your current loan and you refinance to a 30-year loan, you could end up paying more in interest overall to borrow the money and have 20 extra years of mortgage payments.

A cash-out refinance is a type of mortgage refinance that takes advantage of the equity you've built over time and gives you cash in exchange for taking on a larger mortgage. In other words, with a cash-out refinance, you borrow more than you owe on your mortgage and pocket the difference.

Refinancing doesn't reset the repayment term of your loan, but it does replace your current loan with a new loan. You may be able to choose from different offers for your new loan depending on your goals, including a longer or shorter repayment term.

Applying For A Refinance Results In A Hard Inquiry

This notifies the major credit bureaus that you're applying. This is the type of inquiry that causes a small dip in your credit score. Although credit inquiries stay on your report for 2 years, only inquiries in the last year impact your score.