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Mortgage Rates Are at An All-Low –should You Refinance?

With mortgage rates at an all-time low, we’ve been refinancing many home loans, helping our clients to restructure their finances and saving them money in the process.

Are you also considering refinancing your current mortgage for the first time? Here are some of the questions get about refinancing. 

And remember that we’re always available to answer your questions personally. 

Reasons to Consider Refinancing

Let’s first explore the reasons that you would want to refinance. The primary reason homeowners refinance their mortgages is to lock in a lower interest rate, as we mentioned above. This means saving money! It could mean that your monthly payment is lower or that more of the payment goes toward the principal instead of the interest. 

Or the savings could be compounded over the life of the loan. Here some other ways that you could benefit financially by refinancing your mortgage:

  • To remove your private mortgage insurance (PMI)
  • To reduce the life of the loan by refinancing into a 15-year loan instead.
  • To switch from an adjustable mortgage rate to a fixed loan
  • To access the equity from your home

With that said, here are other things that first-timers should consider when refinancing.

There are fees associated with refinancing. Similar to your first home purchase, there are fees, taxes, and closing costs with getting a new home loan. Since there are fees, it’s important to asses the break-even point –that is –the point where the monthly savings created by refinancing offsets the cost of it. We can help you determine what this break-even point is, but as a general rule, the break-even point should be in about 2 years after refinancing. 

That means that the cost of the refi should be equal to the savings of the refi at the two-year mark.

Your credit score still matters in refinancing. Just like your credit score determines the rate you qualified in your first mortgage, it will also determine the rate you get this second time around. That’s not to mean that you shouldn’t refinance if your credit score is lower than it was before as there are other factors we look at, and it may not be worth the risk to improve your rate before refinancing. Interest rates can change fairly quickly, and they’re currently the lowest we’ve seen in several years. There’s no telling how long they’ll remain this low.

You can refinance your government-backed loan. Depending on your situation, yes, you can refinance your FHA, VA or USDA loan. One of the most popular options is the streamline refi programs. With a streamlined program, you reduce or eliminate much of the income, credit, or appraisal requirements found in standard refinance programs. One thing to note is that streamline refi’s don’t always allow a cash-out option. 

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