Is refinancing worth a closer look? Five questions to ask first
Refinancing may change your monthly payment, but it can also change your closing costs, payoff date and total interest. The useful first question is not “Can I get a lower payment?” It is “Would a new loan fit what I am trying to accomplish?”
You can begin that review without sharing a credit score, loan statement or account number with AAC. Write down your answers to these five questions.
1. What do I want to change?
You might want a more predictable payment, a different repayment timeline, or simply a clearer comparison before deciding to keep your current loan. Name the goal first. A lower payment that comes from extending the loan term may have a different long-term cost than a lower payment from a better rate.
2. How long do I expect to keep the home or new loan?
If you expect to move or refinance again, upfront costs have less time to pay for themselves. Use your own realistic time frame when comparing options; do not assume you will keep a new loan for its full term.
3. What would the new loan cost to start?
Look at lender charges, points, credits, other closing costs and cash needed at closing. Ask whether any costs would be added to the new balance. A “no closing cost” label does not necessarily mean there is no cost.
4. What happens to the loan term and balance?
Compare the time left on your current mortgage with the proposed new term. If the new loan extends repayment, ask how much principal you would still owe at the point when you might sell or refinance again.
5. What do actual written offers show?
If you decide to explore options with a mortgage professional, compare written Loan Estimates on the same loan amount and loan type where possible. Review the payment, upfront costs, lender credits and the “In 5 years” figures. Those figures describe each proposed loan; they do not by themselves calculate savings against the mortgage you already have. Ask for a comparison over the same time period.
The Consumer Financial Protection Bureau’s Loan Estimate guide explains the form, and its comparison guide shows what to compare across offers.
A useful next step
If you want to organize your questions before speaking with a mortgage professional, AAC offers a free, printable comparison worksheet. You can also request a planning follow-up by sharing your state, general timing and what you want to understand. Please keep credit scores, account numbers, loan balances and financial documents out of the AAC form.
Use the free refinance comparison worksheet
Request AAC planning follow-up
AAC provides educational planning resources. This article is not a loan application, an offer of financing, a savings estimate or a recommendation to refinance. A mortgage professional authorized for your state must review your situation and any actual loan options.