With the recent decline in interest rates, we are in the midst of what market forecasters are calling a mortgage refinance “boom.” One study by Black Knight estimated that, as of July 2019, nearly 8 million homeowners were eligible for a mortgage refinance. If you own your home, you could benefit from refinancing.
As with every financial decision, there are a few things to consider. If you’re on the fence about whether a mortgage refinance makes sense for your situation, there are a few questions you can ask yourself to plan a discussion with a lender.
Are mortgage rates lower than when you originally borrowed? If interest rates are lower now than when you were originally approved, you may want to consider a refinance. Because rates fluctuate, it’s a good idea to take advantage during periods of low rates before they rise again.
Has your financial situation changed? If your financial situation has changed since you borrowed, it could benefit you in the form of lower rates. When you apply for a refinance loan, various factors will be taken into account such as your current monthly income and credit score. You will go through an approval process similar to when you first applied.
Are you moving anytime soon? If you’re not planning on staying put, either because you’re moving or planning to sell, it may be in your best financial interest to stay put as it can take several months, or even years, to break even. Be sure to discuss your plans with your lender if this is the case.
Will you save money by refinancing? There are two primary ways to save money when refinancing; reducing monthly payments and saving on interest that you pay on your home in the long term. Connect with your lender to compare different scenarios.
Will your income be changing soon? As we discussed earlier, you will need to go through another approval process when refinancing your home. Because your monthly income will be looked at, you’ll want to be sure that your income won’t be decreasing any time soon as this could create a challenge during the approval process.
As always, the best way to determine your refinancing eligibility is to discuss your specific situation with a trusted lender. The Premier Mortgage Resources team is here to help you make informed financial decisions. Contact us today to be put in touch with a local mortgage consultant in your area.