2. Make bi-monthly payments on your own.
3. Switch to a 15-year mortgage from a 30-year.
4. Consider refinancing.
Here are some questions you'll need to answer:
How long do you plan to keep your loan? You should plan on keeping your loan—staying in your home and not refinancing—for at least three years. Nobody has a crystal ball, but it's something to think about. Staying at least three years makes the costs of refinancing worthwhile.
How long will it take to recoup your closing costs? I've never refinanced without mortgage closing costs and fees. Anyone that tells you differently is lying: Refinancing is never free. So you have to figure out how long it will take to get these costs paid off and your real savings to start. If you have to pay $2,500 in closing costs, but your monthly payment will be $100 lower, your real savings would begin after 25 months—which sounds a little too long for me. I'd want to get my money back in 18 months or less before I pull the trigger.
How much lower will your interest rate be? Refinancing a 7 percent loan down to 6.25 percent just doesn't make sense. The actual savings just aren't there. I've always used the benchmark of lowering your rate by at least 2 percentage points, or close to it. If a lender runs numbers that don't approach a two-point reduction, you're probably wasting your time.
I'll give you a great example. I just input the terms to the mortgage I'm paying off now. If I refinanced my 5.75 percent loan down to 5.25 percent, my monthly payment would drop by $66 per month. Sounds great, right? Wrong: The interest over the life of the loan would increase by almost $5,600, because if I roll the closing costs into the loan, the actual amount of the loan goes up. Also, you're getting into a new 30-year loan. The additional interest paid on the larger principal for a longer timespan means it's not worth doing.
But if you lower your rate by at least 2 percent, it makes sense to do it. The loan goes up, but in the end you're saving money.
Who do you trust? This is the most important question. You need a trustworthy point of contact who understands mortgages and interest rates. These numbers can be easily manipulated, sticking you with a refi that looks like it's saving you money but is actually costing you more. Find a guide you already trust or can start to trust; someone among your family, friends, or coworkers can make a recommendation.
https://getcurrency.com/blog/4-suref...rtgage-payment
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