If you have a Colorado mortgage now, you may wonder when it makes sense to refinance. It seems like everyone around you is refinancing right now because of the low-interest rates. Does that mean you should too?

While refinancing can be a great way to save money, there are some factors you should consider before you do.

How Long will you be in the Home?

When rates drop, it can make you feel like you should jump up and refinance, right? You can save money, so why not?

But, if you won’t stay in the home too long, refinancing may not make sense. The closing costs may cost you more than the savings themselves.

If you’ll be in the home for a long time, though, it can definitely be worth it. You’ll pay off the closing costs with your savings and after that, you earn the savings of the lower payment.

Can you Shorten your Term?

Think about how long you’ve already paid on your mortgage. If you’re still in the first couple of years, it won’t make much of a difference. Most of your payment is interest charges in the first few years.

After that, though, you’re paying more principal. This means if you refinance and start over, you’re back at square one and you’ve added time onto your mortgage. If you can afford a shorter term, even if it’s a 25-year term, you won’t add time to how long it takes you to pay off the loan.

Do you Need to Tap into your Home’s Equity?

If you’ve had your home for a while and earned equity in it (you owe less than it’s worth), you may tap into it. Typically you need to leave at least 20% equity in the home but can take out the rest.

If you have a low first mortgage balance, you may have some money to play with if you’re thinking about home renovations, consolidating debt, or even investing for your retirement. Lenders don’t tell you how to use your funds. As long as you qualify for the higher payment, you can take the equity and use it how you want.

Do you Need a Better Term?

If you originally took out an adjustable-rate loan but now want something more predictable, it may make sense to find a fixed Colorado mortgage. With fixed rates so low right now, it’s a great time to take advantage of the lower rates that may even match the rates you originally got with your ARM.

Final Thoughts

If you’re in the market for a Colorado mortgage refinance, let me help you choose the right program. Not only must you determine why you want to refinance, but also which program would suit you the best.

Today you have many options including conventional and government-backed loans. I can walk you through your options, show you the pros and cons of each and help you get the best rates possible so you save the most money on your loan.