Unfortunately, not all debt can transfer to a promotional credit card or personal loan. Refinancing is similar to consolidation since you are replacing one loan with another.
You can pay off the original loan with a new loan with better terms, such as a lower rate, shorter period, or from an adjustable rate to a fixed rate.
Along with housing prices, the interest rates on mortgages fluctuate with the times. Fixed-rate home loans were between seven and eight percent in the 1970s. The average rate peaked at 18 percent ten years later in the 1980s. In 2012, the middling rate dropped to a historic 3.31 percent.
Examples of how your interest rate affects your monthly payment if you have a 200,000 mortgage:
- $3,014 at 18 percent
- $1,398 at 7.5 percent
- $898 at 3.5 percent
Wait for refinance rates to drop before going through the process.
You might also consider refinancing for a shorter term for an even lower rate. For instance, 15-year loans have lower rates than 30-year loans. However, your monthly obligation might be higher.
For instance, for a $200,000 mortgage:
- Your monthly payment would be $898 with a 30-year period at 3.5 percent.
- Your monthly payment would be $1,129 with a 20-year period at 3.2 percent.
- Your monthly payment would be $1,381 with a 15-year period at 3 percent.
You might have fees for setting up the new mortgage, so make sure the interest rate or terms are worth the price. It would be a good idea to refinance if you can lower your rate at least two percent.