Interest rates dropped at the beginning of the pandemic and many homeowners rushed to refinance. Refinancing became a nation-wide quarantine activity along with bread-baking and zoom calls. As the economy begins to stabilize and interest rates inevitably rise, all homes should consider refinancing before these record low rates become a part of pandemic history! Homeowners who closed on their mortgage as early as 2020 can still refinance and save!
What is a Refinance?
When you buy a home you obtain a mortgage that has an interest rate. A popular mortgage program for home buyers is a fixed rate mortgage. This means the interest rate determined at the time of purchase is set for the life of the loan which is usually 15 or 30 years.
Homeowners cannot change the interest rate on their mortgage unless they refinance their loan. A refinance can be done for many reasons. The homeowner may want to pull equity out of their home to fund a home improvement project or make another investment or they may see the refinance as a money saving opportunity.
Should I Refinance My Home?
The decision to refinance is a personal one but there are several considerations that would determine if it’s a good decision for you.
- What is your current rate? It is an industry recommendation that you don’t refinance unless current rates are at least half a percentage point lower than your current rate.
- How long to you plan to live in your current home? If you are in your home for the short term it may not make sense to refinance no matter the rate. There are costs associated with refinancing and you want to ensure the cost benefit is there.
- Could you utilize the equity? When rates are low it can be a good time to withdraw equity that you’ve built up in your home. This cash could allow you to complete a project or purchase that would benefit from the low rates.
- Can you reduce the life of your loan? If you are able to refinance to a lower rate and also a shorter loan term (15 years vs 30 years) the savings could be substantial.
How Much Will Lowering My Rate Save Me?
When you sit down to discuss your plans to refinance with your mortgage lender they can give you information on what your new payments will be.
Deciding to refinance is a math equation. When a homeowner has a typical $250,000 mortgage with a 30 year term, if they cut their interest rate from 5% to 3.5% they would save just nearly $220 a month. However if their rate was 4% and went down to 3.5% they would be looking at just over $70 in savings.
As a homeowner it’s important to consider when you got your home mortgage. Remember, rates were above 4% for most of 2018 and much of 2019. If you bought your home when rates were at or above 4% now is a very good time to consider a refinance.
How Do I Refinance?
If you haven’t ever done a refinance before you might not be sure where to start. Refinancing your home starts with your mortgage lender and a conversation about what your goals are with the refinance. Do you want to take out equity, shorten your loan term or simply cash in on the lower rate!
You will need to apply for the loan and this can be done right on the Title Mortgage website at the Apply Now tab.
You will want to get to work gathering all of your supporting documentation as this will be required to complete the refinance. The process involved with a refinance is very similar to the standard loan process.
Buy a Home in the Upper Valley
For anyone who has been considering home ownership in the Upper Valley this an excellent time to buy. However low rates combined with a thriving real estate market can cause inventory to move quickly. Preparation is key to staying competitive and navigating the real estate market with success.
Contact Title Mortgage Solution, LLC Today
If you are ready to take advantage of these rates, contact the Title Mortgage team today. Our team can help you determine what loan program will best fit your needs and outline how to proceed.