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 If you purchased your home last year, you were probably caught in a rising interest rate environment. While rates were historically low at that time compared to the average mortgage rates, we now see rates lower than they have been in 18 months. In early January the Federal Reserve lowered the federal funds rate, which is the rate at which banks lend each other money, by 1/4th of a percent. This prompted many people to consider whether or not to refinance their current mortgage. Refinancing is not for everyone. If you’re not planning to live in your home for very long, then you may not need to refinance. That’s why I encourage all of my clients to contact me at least once a year for a financial check-up. After all, you go to your doctor each year for a check up, why not find out if your mortgage loan is working for you at least once a year. Here are some of the items I will review with you to help you make the refinance decision. How Long Do You Plan To Own This Home? Depending on the exact cost of refinancing and how low your new interest rate will be, it can take a few years to recoup the costs of refinancing. That’s because it takes time for your savings from the lower interest rate to surpass the amount you’ve paid upfront to refinance. The only way to find that out is to call me and review your savings based on current rates. Does Your Current Mortgage Have A Penalty Clause? |
If you have a pre-payment penalty on your current mortgage, which means
that you’ll be charged a penalty for paying off your mortgage early, it
may cost you too much to refinance. If you’re not sure whether you have a
prepayment penalty, I’ll look up your information for you and let you
know. Is Your Payment About To Adjust? If you have an adjustable rate mortgage, and the payment is about to go up soon, you may want to weigh the differences in the new payment versus a refinance payment. I’ll be able to help you determine what situation is best for you based on the amount of time you plan on owning your property. Do You Need The Cash? Getting a lower interest rate isn’t the only reason to consider refinancing. If you need cash for home improvements, you might want to pull equity out of your home for your construction projects. Of course, you could use a home equity loan or a line of credit, but those rates are generally higher than a mortgage or refinancing rate. If interest rates are very low compared to your current mortgage, you could save hundreds of dollars by refinancing. Making the best financial decision can require some complex calculations. As your mortgage professional, I’ve been trained to help you figure out whether refinancing is the smartest move for you and your family. A 5-minute phone call may be all it takes to save you thousands of dollars this year, so please pick up the phone and get your financial check up! |
