Is It Time To Refinance Your Home Mortgage
How do you know when it’s time to look into mortgage refinancing? When are the rates low enough to warrant the effort of a mortgage refinance? Once again there is no one set answer. If you are in dire straits, it may be worth checking into even if the mortgage interest rate is not the best. With the current financial market in the state it is, the mortgage interest rate is at lows we haven’t seen in many years. Making this a great time to ask about mortgage refinance rates.
There are several reasons to look into mortgage refinancing no matter the economic climate. The main reason to refinance is to lower your mortgage interest rate and reduce your monthly payments. This is a great reason and will reduce your overall costs. However, this won’t reduce the term of your home mortgage and can be a drawback. If you have an adjustable rate mortgage there is still the possibility at the mortgage interest rate will increase again. When or if it does, you will just have to refinance again.
You can also use mortgage refinancing to reduce the term of your loan. This can save you thousands of dollars in interest over the term of the loan. Overall, this can be a better option than just reducing your monthly payments. Reducing your payments is the best solution if you need immediate funds. Reducing the amount of time you have to pay can save you more money.
As a general rule you should only refinance if you can get a mortgage interest rate that is at least two percentage points lower than what you have currently. All situations are different however and this may not apply to you. Remember that because rates are so low, home mortgage lenders are being a lot stricter than a few years ago. Make sure you have all your information in order before approaching your lender. Check your credit to make sure it is still in good shape and that you’ve been making all your payments on time.
Also with the low mortgage rates most lenders are requiring more before they will consider a refinance. Most home mortgage lenders are requiring 20% equity before they will approve a mortgage refinance. If you have less than this, it will likely not be worth your time to get it approved. It is projected that in the next few quarters the mortgage interest rate will continue to fall and will likely stay steady for a while, so you do have some time. You have to look at the cost for mortgage refinancing as well. You have to pay the same costs and fees as when you first got the mortgage loan. It can take a bit to recoup those costs with your savings.
Certain circumstances will make mortgage refinancing the best case for you. Sometimes it will not. Ultimately only you can make the decision and hopefully the savings will start to add up.