Is Mortgage Refinance Right for You?

A successful refinance can save you tens of thousands of dollars over the lifetime of your mortgage. That savings makes the refinance one of the most powerful financial tools available to homeowners. Knowing how and when to refinance can, however, be a daunting task. Luckily, determining whether a refinance is right for you doesn't have to be difficult if you follow these easy steps.

Step 1: Consider your goals

First, you need to evaluate your personal and financial goals. What you're really trying to determine is where you want to be and how much you need to get there. Your mortgage should help you achieve your goals rather than work against them.

Important questions to answer

  • What goals do you want to achieve (e.g. kid's college expenses, retirement, vacation home)?
  • How long do you intend to own the property?
  • When do you want to retire?
  • How much do you need and when do you need it?

Step 2: Evaluate your financial situation

Before you crunch the numbers on a new mortgage, it is important to evaluate your current financial situation. Careful work here will make the decision about what type of loan best suits you much easier.

Important questions to answer

  • What are you earning now and what can you expect to earn in the future?
  • How much savings do you have?
  • How much equity do you have in your house?
  • How well could your finances tolerate rate or payment adjustments?
  • If you did have money to invest what kind of return would you expect?

Step 3: Evaluate your current mortgage

In this step you need to review the terms of your existing loan for suitability. Things change over time. Your financial mindset today is likely very different than when you originally closed your loan. If that is the case, then your loan may not be the best for your current financial goals.

Important questions to answer

  • Can your rate or payment adjust in the future?
  • If adjustable, can you afford an adjustment?
  • Is this the most suitable type of loan to help you achieve your financial goals?

Step 4: Evaluate mortgage options

In this step you need to determine the type of mortgage that will best help you reach your goal. There are many different types of mortgages available today but most will likely not be suitable for your particular situation. This step will help you narrow down your choices to make it easier to find exactly the right home loan and refinance mortgage rate.

Important questions to answer

  • Do you need money now for investment or debt consolidation?
  • Do you want to save money in the future?
  • Are you better suited to an adjustable rate mortgage (ARM) or fixed?
  • If ARM, how long would you like the initial rate to remain fixed?
  • How long do you want to be making a mortgage payment?

Step 5: Evaluate the market

Once you've settled on the type of loan you want to refinance into, the next step is to find out if that loan is available at a rate and cost that would benefit you. You'll want to not only compare rates, but also costs to determine the best loan overall. The mortgage industry is extremely competitive, but getting unbiased pricing information can be difficult without serious research. Luckily, there are a websites like Credit Sesame that make it easy for consumers to get unbiased refinance mortgage quotes.

Step 6: Evaluate the merits of refinance

Once you've located the right mortgage and determined the rate and cost, you need to evaluate how well this new mortgage would impact your current financial situation and future goals.

Important questions to answer

  • Does this new loan help achieve my goals?
  • Does the benefit I get from the new loan offset the cost?
  • Can you afford this new loan now and in the future?

Credit Sesame Automates Refinance Decision-Making

Credit Sesame is a completely free service for consumers that automates the refinance decision-making process. Credit Sesame's advanced analytical decision engine sorts through thousands of loan scenarios and presents consumers with the specific loans that meet their goals and generate the most savings over time. Sign up today to find out if refinancing your mortgage is right for you.