When you hear financial news, see advertisements or listen to friends talk about refinancing, you may wonder if it’s something you should do also. However, if finances aren’t your forté or you’re just not sure if it’s the right time, there are a few things to consider before you decide. Here are four questions you should ask yourself before applying to refinance your home.
Is your current interest rate high?
Since 2009 (for 10 years now), mortgage interest rates have been at 5 percent or lower. Arguably, one might say mortgage loan rates are – and have been – low for a long time. However, only one percentage point difference in your interest rate can make a big difference in how much you pay for your home over time. It can also make a significant difference in your monthly payment amount. Comparatively, is your current interest rate high? If it’s one or more percentage points higher than the current rates, you might say it’s time to consider refinancing.
Has your home increased in value?
Have you noticed that homes similar to yours in your neighborhood are selling for more – or much more – than you paid for your home? If the answer is yes, think seriously about refinancing. Why? Because this means your home has equity, which is a financial value that can be used to pay down your mortgage or to pay off other high-interest debt. When your home increases in market value, that can mean money in your pocket through refinancing.
Has your credit score improved?
Since the time you took out your original mortgage loan, has your credit score improved? If so, that could mean you will now qualify for a lower interest rate than your current rate. Banks and other lending institutions give the best mortgage rates to the best-qualified borrowers. Check your credit score! If it has shown significant improvement over the past number of years, you could be in line for mortgage re-fi savings.
Do you have an ARM?
Although historically mortgage rates have been low for a number of years – and trending even farther downward in recent years – homeowners with an adjustable-rate mortgage (ARM) sometimes can benefit from refinancing. Homeowners with an ARM do well when mortgage rates fall (their rate goes down). However, when rates inch upward, they begin to lose the financial benefits that come with low rates. If you have an ARM, now may be a great time to refinance to lock in a historically low rate that won’t go up even when interest rates rise over time.
Have you decided it’s time to refinance or want to explore just how much money you could save if you do? If so, you can rely on the expertise you’ll find with certified mortgage planner Ed Currie and his team. Serving more than 5,000 homeowners and homebuyers, the team at Ed Currie is knowledgeable, experienced and results-oriented. Contact Ed with your specific needs or call him today at 847-214-2404.