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When to Refinance
Since the primary cost of a mortgage is the interest rate that you pay, it makes sense that when interest rates have fallen, you can lock in savings with the newer rates.
You can also Refinance your mortgage when you are on a variable rate and want to lock into a fixed rate. While your rate may be higher than the variable rate, you have the peace of mind of knowing that your rates will stay fixed if the variable rate does indeed go up.
Refinancing can also be extending the amortization of the loan. This is simply paying the loan back over a longer period of time, which decreases the principal repayment, resulting in an overall decrease in the debt payment made. This is a strategic move when you are facing cash flow issues.
While your payments have indeed gone done, you have extended the term which means you will be paying off the loan longer, and thus pay more interest in the long run. Don’t do this unless you don’t have the extra money available.
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