Is This a Good Time to Refinance?
There’s more to a refi than rates.
Deciding to refinance is not just about chasing the lowest mortgage rate, because rates aren’t predictable. According to Freddie Mac, the 30 year fixed-rate mortgage hit an all-time low on April 20, 2020. Will they go lower? It’s impossible to tell, so while low rates may catch your eye, there are many reasons to refinance.
Rates, rates, rates
This is probably the number one reason people think of refinancing. Rates are down so I can save money. Yes, when rates are down it’s a great opportunity, but remember that a reported rate drop won’t necessarily translate into savings for you. Many factors determine your rate, including your credit score and loan type. In addition, you’ll need to review your current rate, the amount of time left on your loan, and cost of refinancing (for example the appraisal, closing costs, and title work). There are calculators on the internet that can give you an estimate, but contacting your licensed CrossCountry Mortgage loan officer will give you more solid answers and help you evaluate your options.
Refi your 30 to a 15
When you’re considering a refi, think about the long term. If you’re refinancing to save money, how much will you save over the length of your loan? While the monthly payments for a 15-year loan will almost certainly be higher than for a 30-year loan, your savings come over time as you pay less in interest. Talk to your mortgage loan originator to see if a shorter term makes sense for you.
Different type of loan
When you bought your home, the loan you took out was hopefully the best one for you at the time. Does it still meet your needs? Perhaps you took an Adjustable Rate Mortgage (ARM) with a low introductory rate. If the ARM is about to adjust, this could be a good time to refinance to a fixed rate loan. Or perhaps when you purchased you couldn’t put 20% down, so you opted for a lower down payment and your loan has monthly private mortgage insurance (PMI). Home values have been increasing steadily, so you may have enough equity in your home to refinance to a loan that doesn’t require PMI.
You love your house, but it needs some work. Where can you get the money? You’re living in the answer. A renovation refinance allows you to take equity from your home (see above) and use it to remodel. Before you decide what to update, check the potential value of projects when you sell your home. If you simply must have a full outdoor kitchen, enjoy it, but realize that you’re unlikely to recoup what you paid for it.
Cash for education
Are your kids getting ready for college? Or are you thinking of going back to school yourself? A cash out refinance could provide some or all the funds you need so you can avoid student loans. However, remember you are borrowing against the value of your home. Before you decide to tap home equity, make sure it’s going to pay for something worthwhile, like education.
Think especially carefully before you refinance to consolidate debt. A debt consolidation refi doesn’t eliminate debt. It takes one kind of debt, such as unsecured credit card or installment loan debt, and replaces it with secured debt. The security for the debt is your home, so if you can’t make your payments, you risk losing the roof over your head.
If you are considering a refinance, your licensed CrossCountry Mortgage loan officer is here to help. Call or email today to discuss your options and decide if this is a good time for you to refi.