When Should YOU Refinance Your Home?
The boxes have been unpacked for some time, the new lawn is coming in nicely, and you’re contemplating a different color for the kitchen walls. Whether still settling in or putting down roots, you may be hearing the buzz about interest rates and wondering if and when you should refinance your home mortgage.
What with the dropping rates and rising home values, refinancing activity has risen significantly this past year in the U.S. Many borrowers have taken advantage of these conditions to replace their existing mortgage with a new one that will benefit them, typically due to one or more of the following factors. Knowing when to refinance, is key.
• Interest rate | Taking advantage of lower interest rates can reduce your monthly payments.
• Fixed or adjustable rate conversion | This depends on your relocation plans. If the rates are good and you’re planning to stay in the home long-term, it can be wise to switch from an ARM (adjustable rate mortgage) to a fixed rate. Conversely, you can switch from your fixed term to a lower ARM program when you plan to sell in the next few years before rates rise.
• Home equity | Our current housing market remains strong which means home values are rising in many regions around the country. Tapping this equity can be a great way to borrow from the home through a cash-out refinance.
• Credit score | Buying your home through FHA when your down payment was low or your FICO was below average can be a tremendous opportunity, but it can also come with higher rates and required mortgage insurance costs. When your credit standing improves, you can knock that monthly payment down through refinancing.
• Income | As with the credit score, an upward change in your income status can be a natural avenue into a new mortgage and a lower payment.
When is it worth it?
To refinance your home, you’ll want to determine the right loan – and the right time – based on your personal goals. If you’re motivated by one or more of the above factors, then take a look at the numbers. When is the break-even point for closing costs versus overall savings? If you’re taking cash out for debt consolidation or other financial needs, look at the difference on high interest credit cards other loans that can save money in the long run.
Converting from an adjustable or a fixed rate term often makes more sense early in your home ownership. However, it may be early on or years in when you make the decision to shorten your mortgage from a 30-year to a 15- or 20-year term, saving thousands in interest.
Ultimately, if refinancing your home helps you save money, build equity, or shorten the term of your mortgage, then it’s an opportunity worth pursuing. Our team of knowledgeable professionals at EnTrust Funding (ETF) can tell you what to expect when refinancing and how to determine the best mortgage solutions based on your individual needs. Give us a call today!