Why Now Is a Great Time to Refinance
For most people, a mortgage is their single biggest expense each month and their most significant financial burden. Right now, mortgage rates are at near historic lows, so now could be a great time for you to refinance. As a result of our COVID-19-impacted economy, the Federal Reserve reduced interest rates, and mortgage rates followed suit. Refinancing could save you thousands of dollars, but it is important to look at your specific situation before you do so. A few things to consider:
Think about your current job situation.
Although recent events have cause mortgage interest rates to plummet, they have also caused and incredible amount of job uncertainty. Before you jump into refinancing your mortgage, be sure to carefully examine your employment situation and income stream. Although refinancing can save you thousands over the life of your loan, there are closing costs and fees associated with refinancing. Be sure you’re ready for the financial impact of a refinance. Your dollar savings probably will not be realized for several years after your refinance. This doesn’t mean you shouldn’t refinance, it just means you need to carefully consider all angles before taking the plunge.
What about your credit score?
Has your credit score gone down since you first financed your home? There is a possibility you may not be able to fully benefit from today’s lower interest rates. Take the time to see what rates you would qualify for based on your current credit score. Slight credit score changes may not have much of an impact, but it’s always best to double check. Refinancing could still be a wise choice for you. If you’re not sure, it’s best to ask.
Be aware that although rates are lower, many mortgage lenders have stricter requirements in place right now. Altered lending requirements may include different requirements for credit scores or more rigorous employee verification processes. Loan guidelines are always changing. Do your homework to see how this may affect you. Although there are more steps involved to refinancing these days, and different regulations in place, refinancing may still be a good choice for you. Talk to your lender to learn more.
When refinancing makes sense.
Refinancing your mortgage doesn’t only reduce your monthly payment. It can have a positive impact in other ways. Refinancing may also allow you to move from the adjustable rate mortgage to a fixed rate mortgage. You may be able to eliminate private mortgage insurance, saving you even more per month. And you might even shorten the terms of your loan, allowing you to pay off the debt even sooner. Carefully examine your details with your lender to hash out all of the details and find out what options are available to you.
Now is a great time to refinance your home, but make sure you take the time to crunch the numbers to understand how a refinance affects you today and into the future. There are many things to consider when looking to refinance your home. But with a few careful steps and some intentional planning, you can be aware of all of the ins and outs of home refinance and take advantage of today’s lower rates.
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