Refinancing your mortgage can be a strategic financial move, but it’s essential to understand your goals and the potential benefits you hope to achieve. Deciding the right financial move for you starts with evaluating your situation.

Refinancing and Interest Rates

If market rates have dropped since you took out your original mortgage, refinancing at a lower rate can significantly reduce your monthly payments. If rates have not fallen, it may not be the best time to refinance.

“A good rule of thumb is you really want the interest rates to be down about a full percentage point before a refinance starts making sense,” says Scott Dickey, President of Cadence Bank Mortgage Services.

What are you trying to accomplish with a refinance?

Before diving into small details, it’s crucial to identify your big-picture objective. Are you looking to lower your monthly payments? Shorten your loan term? Consolidate debt? Each goal has different implications for whether refinancing is the right move.

“The length of time someone plans to stay in the property they own is one of the biggest factors when considering a refinance,” says Dickey. “You need to do a break-even cost analysis. If it costs you $5000 to refinance, and you’re only saving $100 a month, that takes months to get back.”

Reducing Payments

One of the most common reasons for refinancing is to reduce monthly mortgage payments. This could be achieved by securing a lower interest rate or extending the loan term. Lower payments could free up cash for other expenses, providing more flexibility. However, they could also increase the total amount you pay on a home in the long run.

Reducing Your Mortgage Loan Term

Another goal might be to pay off your mortgage faster by reducing the loan term. This could save you a substantial amount in interest over the life of the loan or help you build equity more quickly. A shorter term typically means paying less overall interest, even when monthly payments are higher.

Consolidating Debt

Refinancing can also be a tool for consolidating high-interest debt, such as credit card balances or personal loans, into your mortgage. This could simplify your finances and potentially lower your overall interest costs. Mortgage interest rates are generally lower than rates for credit cards or personal loans, so consolidating debt into your mortgage can reduce the amount of interest you pay. It is also possible to gain tax benefits from consolidating credit card or personal loan debt into a mortgage.

"Mortgage interest may be tax deductible in many situations versus credit card interest, which is not. So it’s always a good idea to consult with a tax advisor to understand how these benefits could apply to your situation."

Scott Dickey, President of Cadence Bnk Mortgage Services

Cadence: Your Trusted Partner in Refinancing

At Cadence, we understand that every homeowner’s situation is unique. That’s why we offer a diverse range of mortgage loan options tailored to meet your individual needs. Our team of lending experts is here to guide you through every step of the refinancing process, from qualification to closing. We aim to make your refinancing journey as smooth and stress-free as possible.

Refinancing your home could be a smart financial move when the situation is right. With Cadence by your side, you can confidently navigate the process. To learn more, contact your local mortgage loan officer today! Visit Cadencebank.com/mortgage.

This article is provided as a free service to you and is for general informational purposes only. Cadence Bank makes no representations or warranties as to the accuracy, completeness or timeliness of the content in the article. The article is not intended to provide legal, accounting or tax advice and should not be relied upon for such purposes.