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Is This a Good Time to Refinance My Home?

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With interest rates hitting all-time lows over the past few weeks, many homeowners are choosing to refinance. To decide if refinancing your home is the best choice for you and your family, start by asking yourself these questions:

Why do you want to refinance?

There are several reasons to refinance, but here are three of the most common ones:

1. Lower Your Interest Rate and Payment:

This is the most popular reason. Is your current interest rate higher than what is available today? If so, then it just might be worth seeing if you can take advantage of the current lower rates.

2. Shorten the Term of Your Loan:

If you have a thirty-year loan, it may be advantageous to change it to a fifteen or twenty-year loan to pay off your mortgage sooner rather than later.

3. Cash-Out Refinance:

You might have enough equity to cash out and invest in something else, like your children’s education, an investment property, a business venture, or simply to increase your cash reserve.

Once you know why you might want to refinance, ask yourself the next question:

How much is it going to cost?

There are fees and closing costs involved in refinancing, and The Lenders Network explains:

“As an example, let’s say your mortgage has a balance of $200,000. If you were to refinance that loan into a new loan, total closing costs would run between 2%-4% of the loan amount. You can expect to pay between $4,000 to $8,000 to refinance this loan.”

They also explain that there are options for no-cost refinance loans, but be on the lookout:

“A no-cost refinance loan is when the lender pays the closing costs for the borrower. However, you should be aware that the lender makes up this money from other aspects of the mortgage. Usually charging a slightly higher interest rate so they can make the money back.”

Keep in mind that, given the current market conditions and how favorable they are for refinancing, it may take a little longer to execute the process today. This is because many other homeowners are going this route as well. As Todd Teta, Chief Officer at ATTOM Data Solutions notes about recent mortgage activity:

“Refinancing largely drove the trend, with more than twice as many homeowners trading in higher-interest mortgages for cheaper ones than in the same period of 2018.”

Clearly, refinancing has been on the rise lately. If you feel comfortable with the up-front cost and a potential waiting period due to the high volume of requests, then ask yourself one more question:

Is it worth it?

You have to do the math to answer that question. Will it help you save money? How much longer do you need to own your home to break even? Will your current home meet your needs down the road? If you plan to stay for a few years, then maybe refinancing is your wisest move.

If, however, your current home does not fulfill your needs for the next few years, you might want to consider using your equity for a down payment on a new house instead. You will still get a lower interest rate than the one you have on your current house, and with the equity you have already built, you can finally buy the home you have been waiting for.

In Conclusion

Today, more than ever, it is important to start working with a trusted and licensed real estate advisor. Whether you connect by phone or by video chat, a real estate professional can help you understand how to safely navigate the housing market so that you can prioritize the health of your family without having to bring your plans to a standstill. Whether you are looking to refinance, buy, or sell, a trusted advisor knows the best protocol as well as the optimal resources and lenders to help you through the process in this fast-paced world that is changing every day.

Please contact Tobie Andrews Real Estate Media for all of your residential and commercial photography needs. Photos, video, and drone. Let us help you!

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