You Should Refinance Your Mortgage

by Julie Peebles

Whether or not to refinance is a question most homeowners are faced with at some point and it can be a difficult decision to make. When weighing the pros and cons, it can help to understand some of the details.

PROS OF REFINANCING

  • Lower interest Rate
  • Change in Rate type ARM to Fixed
  • Cash Out
  • Shorten your term

WHEN SHOULD YOU REFINANCE?

Reviewing the list of pros may have you asking, “What am I waiting for?” Here are some other things to take into consideration.

Credit. Your credit score can make a big difference. If your credit had some challenges when you bought your home, refinancing to a different type of mortgage can not only lower your rate, but reduce how much extra you’re paying each month in mortgage insurance.

Term. If your home was purchased with 30 year financing, reducing this to a 15 year term can lower your rate offer big savings in the long run. Many home owners benefit from this as the reduced term can increase their monthly payment, but the reduced rate makes this increase minimal.

ASK YOURSELF THESE QUESTIONS

Here are a few other questions you should answer that can help in deciding whether refinancing is the right option for you. Once answered, we will work with you to find the loan to best fit your needs.

How much do you owe on your home? The amount you owe on your home can be a factor in your decision. If you purchased your home with a “jumbo loan” (financing over $417,000*) you could be paying a higher rate than a conventional loan would offer. Once your loan balance falls below this, refinancing could lower your rate and save you thousands. *As of January 2017, the new jumbo loan amount increased to $424,100.

How long are you staying in your home? Many realtors will say if you’re planning to move in the next 3 years then refinancing is not a smart move. Closing costs can exceed $2000; do some quick math to calculate how many months it will take you to recoup those costs in what you’ll be saving on your monthly interest by refinancing.

Do you have projects or other debt? Many home owners will use the equity they’ve established in their home to remodel or consolidate; this is called a cash-out refinance. With this type of loan, you’re able to refinance your home and receive cash back at closing. This cash can be used to remodel a room, replace your roof, pay off debt, and much more.

BUT, WHAT WILL IT COST?

This all sounds great, almost too good to be true, so what’s the catch, right? One thing homeowners should keep in mind is the cost of refinancing.

Refinancing can cost almost as much out of pocket as purchasing your home did. Some lenders will advertise no-cost refinances but this is simply not the case. Whether the costs of refinancing are added to your principle mortgage balance or built into the rate, there’s no such thing as a free refi.

When asking yourself these questions, it is important to look at the big picture. A trusted loan advisor can be a great resource in determining which loan is best for you.

If refinancing is something you’ve been considering and you’re not sure if the time is right, give us a call. Our helpful advisors have the right tools and best technology to work with you and determine the best loan to meet your goals.

 

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