Any time your rate is reduced at the same term and principal amount, it has the potential to lower your monthly payment. Your Guaranteed Financial Loan Originator can provide you with a closing cost estimate to help you weigh the pros and cons of a refinancing your mortgage.

There are a few ways a refinance can lower your monthly payment: 

Refinancing to a lower rate

Refinancing to a lower rate may decrease your interest costs and monthly obligation.  A good rule of thumb is to look at the percentage change in your loan payment.  A $100 savings on a $1,000 is a 10% savings in payment.  That same $100 savings off of a $1,500 payment is only a 6.7% savings.

Change the term of your loan

Refinancing a 15 year mortgage to a 30 year results in a lower monthly payment because your payments are spread over a longer period of time. However, you will pay more in interest during that longer term. If your goal is spending less money overall, you may want to shorten a 30 year mortgage to 20 or 15 years. The monthly payments will be higher, but you will pay less interest over the life of the loan.

Combining Other Debts

Refinancing also gives you the option of combining credit debt, car loans, etc. into your mortgage.  While not always recommended, it can provide some much needed relief for homeowners struggling with their total monthly payments.  The same guidelines apply that do in a Cash Out refinance in that most lenders limit the loan to value ratio of these types of loans to 80%.  If you feel a debt consolidation is right for you, contact one of our Mortgage Loan Consultants for a more comprehensive explanation of all of our programs and options.