There will be costs associated with closing on the new loan since you will need to close on the loan, just like you did when you purchased the home. You may also have to get a current appraisal of the home. It is important to make sure you understand the costs associated with refinancing when choosing a refinancing option that is best for you:
- Refinance for a lower interest rate while keeping the same number of remaining payments as the original mortgage. For example, if your current interest rate is 6% and you can refinancing at 4%, without altering the repayment period, your monthly payments will go down since you will be paying less interest.
- Refinancing the repayment period on the existing loan for a longer period. For instance, if you initially have a 15-year fixed rate loan, refinancing to a 30-year fixed rate loan will lower the monthly payment. Just keep in mind, you could end up paying more in interest because the loan is much longer.
