This may be a question you’re asking yourself. Refinancing has been very popular among American homeowners over the last several years as we continue to experience all-time low interest rates. A refinance allows a homeowner to remain their home with a lower interest rate and therefore, likely a much lower monthly mortgage payment. Refinancing also has allowed many homeowners the opportunity to get out of a specific loan type such as an adjustable rate mortgage (ARM) into a more stable fixed rate loan.
If you’re interested in refinancing, you may be wondering if you’re a good candidate. Here are a few tips to read through and compare to your particular situation to help you make a good decision on your next steps.
1) Are you planning on staying in your home for the long term? This is a good place to start. Evaluate your current plans and where you’ll be in the years to come. If you plan on staying in your current home for many more years, refinancing your mortgage to a lower rate is probably a good idea. Because refinancing your loan typically costs between 2-3 percent of the total loan amount, you’ll need to remain in your home long enough to get that money back in monthly savings.
2) Do you have your closing costs saved? As we shared, refinancing your mortgage will cost you between 2-3 percent of the loan. It won’t save you money in the long run to roll those closing costs into your total loan amount to its best to have this money in savings before you start shopping around for your loan. If you don’t have a good savings ready for a refinancing, maybe doing this now isn’t the best decision for you.
3) How long have you been in your home? If you’ve already been paying your current mortgage for many years, refinancing may not be a good cost savings for you in the long run. The best way to understand your options is to meet with a lender to see if refinancing to a new loan, even one with a shorter term, is a good way for you to save money. If over the long haul it’s not a good enough cost savings for you, consider keeping your existing loan but pay more each month to pay it off faster.
4) Are you partnered with a good lender? If you like your existing lender, meet with them to understand your refinancing options. If you had a bad experience the first time around, make sure you shop around for a new lender. There are many to choose from and interviewing at least three will give you an idea of their experience and their ability to help you get a loan that meets your short and long term needs.
5) Are you in a tough spot with your existing mortgage? This may make it tough to refinance but may also give you’re the impetus you need to get your existing loan refinanced. This is why partnering with a great lender is critical. You’ll need to be completely honest with them about your situation and be sure to talk through all of your options in order to get you into a loan you can afford.
If you’re ready to talk to a lender to better understand your refinancing options, CLICK HERE.