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A great time to refinance your home mortgage

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Posted at 5:45 AM, Sep 24, 2020
and last updated 2020-09-24 06:59:04-04

GREEN BAY, Wis. (NBC 26) -- During this time of financial uncertainty, experts say it's a great time to refinance your home mortgage.

Interest rates are historically low, but there are some factors you need to take into account before doing so.

You can refinance your home and achieve lower monthly payments, or you can pay off your mortgage quicker by adjusting the term.

Refinancing costs money, so it is a great option if you plan to stay in your home for a long time.

It also depends on your credit health.

"You can achieve what you call a break even period. The cost that you put forth to refinance that mortgage can be recouped by a lower payment the longer you live in your house," said Preston Cherry, an Assistant Professor of Personal Financial Planning at UW-Green Bay. "That monthly savings every month, at some point, nullifies the cost you had at year 3, 4 or 5."

Your home mortgage is another way to have ready-cash for your household during the pandemic.

You can call your lender and see if there is the option to suspend payments for an amount of time.

"Mortgage companies don't want to kick people out," said Cherry. They'd rather have 30 years of payments rather than a house on their hands."

One thing to keep in mind is the extension of payments will be tacked onto the end of the loan so you will have to make those payments in the long run.

When you refinance you have the option to cash out, or take out equity on your home.

Experts say this is a good idea if you're using the money to make reasonable upgrades to the home, such as a kitchen remodel.

You could also cash out to pay off high interest debt.

Experts say it's a bad idea to cash out to support some type of lifestyle that you can't maintain long-term.