Mortgage rates are currently near rock bottom. With rates so low it seems like it would be a great time to refinance. In many cases, refinancing today is a good idea. However, it is important to understand if it is the right time to finance for your particular situation. There are many factors that should be considered when it comes to choosing whether or not to refinance.
Why You Should Refinance Your Mortgage Today?
In order to determine whether or not you should refinance your mortgage today, you need to consider your financial goals. In addition, how long you plan to stay in your current home and your current credit score. All of these things along with current interest rates should all play a role in your decision to refinance.
When it Makes Sense to Refinance
The typical trigger for many people to consider refinancing is when they notice mortgage rates starting to fall lower than their current loan rate. However, there are other reasons to consider refinancing.
Paying off Your Loan Faster
If you want to pay off your mortgage faster using a shorter-term mortgage, refinancing is a good option. This can happen when you gain enough equity to refinance the loan without using mortgage insurance. Another option is if you are looking to gain some cash from your equity by using a cash out refinance option.
What are Good Mortgage Rates?
Mortgage rates do not always follow short term interest rates being lowered by the Federal Reserve. Do not focus on the mortgage rates that you are seeing advertised. Rates for mortgages fluctuate greatly each date. The rate that you are quoted might be higher or lower than a published rate at any time.
Mortgage refinance rates are primarily based on your current credit score and the amount of equity that you have in your home. If you have proof of steady income and a good credit score, you are more likely to get a better rate.
A good rule of thumb to follow is that if you are quoted a rate that is more than a percent lower than your current rate, it is a good time to refinance your mortgage. However, this is a generalization and in some cases, even if the rate is half a percent better than your current rate, it might be worth it to refinance. The best option is to use a mortgage calculator to determine your potential savings. You will need to add in the cost of the refinance such as a credit check, appraisal, closing costs, and origination fees. It is also important to make sure that you will not have to pay a penalty to pay off your current loan early. Once you determine the interest rate that your new loan will be, you can calculate your monthly payment to see how much you can save each month.
When it comes to refinancing your current mortgage it is really all about timing. If your credit score has improved greatly since you bought your home, you might be eligible for a much better interest rate through a refinance. However, if you have a growing family and you are planning to sell your home within the next year or two, refinancing might not be the best option as the savings will not be worth the cost of closing on a refinance loan. Additionally, if you have already paid a significant amount of your mortgage, refinancing is not a good idea.
If you plan to be in your house for at least five more years and you can save at least one percent on your interest rate by refinancing, now is the time to do it.
Graves Development Resources | Land Developer in Omaha, Nebraska
Graves Development Resources (GDR) has been designing and building the market’s finest neighborhoods since 2000, with over 5,000 homesites and important commercial development projects throughout Douglas and Sarpy Counties.
Our pages showcase current neighborhoods where new home buyers may select from hundreds of home sites. We are definitely “phone friendly” and welcome the opportunity to provide you all the information you need before making one of the most important decisions of your family’s future. Contact us with any questions.