Making a decision to refinance can bring up many questions but the most important one of all is should you refinance? Have no fear, we’re here with a little refinancing education and hopefully this helps you to answer your question so that you can figure out if refinancing is right for you.
Refinance
Although mortgage rates have been on the rise since 2014, it may not be necessary to refinance.
Before You Refinance
Before you rush into a refinancing commitment you need to ask yourself these questions:
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Are you looking to lower your monthly costs and save over your mortgage term of 5 years or longer? If this is the case, then refinancing is the right choice.
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Will your new lower rate low enough? You can always ask your mortgage broker.
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Will you meet credit history and score requirements to get the best mortgage rates?
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What is the appraised value of your home? This is a big one, even homes can depreciate in value. Refinancing might not be right for you if you owe more than your home is actually worth.
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Will you have to get private mortgage insurance (PMI) when refinancing? If you’re refinancing for anywhere between 80 to 100 percent of your home’s value, it’s highly likely you’ll need PM. This can take away from the total you will save on refinancing.
When Is the Best Time to Refinance?
Get to know your lender! Find out what their fiscal year end is. This will open the door to pick the right time of year to refinance. Lenders generally want to close more loans closer to the end of their fiscal year.
Just like car dealers, mortgage lenders have monthly targets too. Therefore, they reserve their energy for the second half of the month allowing you to secure a better term.
If you plan on remaining in the same home for the next 10 years then it’s definitely a good time to consider refinancing it, especially if you’re able to get an interest rate that is significantly lower. Even changing your rate from a variable to fixed one will protect you against raising future rates. This is easy to accomplish with a decent credit rating.
You can speak to your broker and have them keep an eye on mortgage rates for you. Then they can notify you on the trends. It’s a surefire way to refinance at the right time.
Not to Refinance
Many mortgage firms speak of refinancing only, but what they don’t tell you is when you should not refinance. That’s what we’re here for, to protect your best interests. Here are 3 generalized situations when you should put refinancing on the back burner:
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If you refinance later in your mortgage, amortization will restart. This means that you will start paying interest again and stop building equity, which is the opposite of what you’re doing now.
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If the mortgage you have currently contains a prepayment penalty clause. Having to pay a prepayment penalty can extend the time it takes you to break even after refinancing.
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Moving in the next couple years? Your monthly saving are probably not enough to cover the upfront costs and fees to refinance.
If you would like to speak to a professional about your circumstances and need help before you make a definite decision on refinancing your property, call a qualified mortgage broker at AKAL Mortgages.
When we say Yes! We stand behind our promise.