Everyone keeps talking about falling interest rates and how our current real estate market gives buyers and borrowers a distinct edge over past “sellers-markets.” However, deciding whether or not you would personally benefit from refinancing your home loan right now is much more complicated.
You should considering refinancing -- replacing the mortgage you have with one that offers a better rate or better terms -- if you are in one of the following situations. The first: you are now able to lock into an interest rate that is significantly lower than that one you have now. Saving an entire percentage point or more can translate into saving hundreds of dollars every month. Who wouldn’t benefit from lower payments?
You should also consider refinancing if you currently have an ARM or adjustable rate mortgage and your rate is likely to go up in the near future. Paying off that nasty ARM and accepting a new one can allow you to get into a fixed-rate situation or at least a new adjustable rate with better terms (for instance, many more years before the current interest percentage will rise). There has never been a more important time to get yourself on good, stable footing financially.
A final reason to consider a re-fi: you want to borrow some extra funds to use for a big renovation or addition. Contractors are starving for work because of the current real estate market, and now is a great time to take advantage of their lower prices by having work done on your home. Put on an extra room to make your house more profitable when the market improves, invest in landscaping to increase your curb appeal, or simply do the projects that will make your living space more functional or comfortable. Because you can request cash back at signing based on the equity your home has accrued, a new loan may allow you to lock in better rates and get that work done around the house!
That said, you should not refinance if you plan on moving in the near future. It can take several years just to pay off the closing costs from your new loan, so you will actually end up losing money if you sell too soon and it may hurt your credit.. You should also avoid it if you are ten or twenty years into paying off your current mortgage -- while your new arrangement could reduce your monthly payments, getting locked into another thirty years will cost you in the long run.
Refinancing can be a great way to save money both now and into the future, and we assure you that great rates are available. However, as with all financial matters, the decision needs to be carefully weighed against your other options. Get a quote today and discover whether or not lower payments are in your future!