3 Good Times to Consider Refinancing
With average mortgage interest rates in the United States consistently reaching historical lows, the word refinance is on the mind of homeowners across the country. Refinancing is a fantastic way for homeowners to save money on mortgage payments, improve their homes, and move closer to accomplishing financial and personal goals. But when should you refinance and get in on the savings?
Thanks to the seemingly endless buzz around refinancing, you might be wondering whether now is a good time for you to refinance, and the team at Local Mortgage would like to help you figure that out. For that reason, today’s article will cover three times to consider refinancing. If you would like to learn more after reading our post, then contact Local Mortgage to discuss your circumstances with one of our mortgage experts.
Interest Rates Drop Below the Rate on Your Mortgage
Perhaps the single best time to consider refinancing is when the mortgage interest rates fall below the interest rate on your home loan. Since interest rates have consistently fallen to new historical lows over the last five years, there is a good chance that you can refinance to a lower interest rate right now.
You will need to consider how much savings you will realize and how much it will cost you to refinance into a lower rate loan. Rate savings are great, but you have to factor in the costs. Once you have calculated your monthly savings and you have an estimate of the costs, divide the cost by the monthly savings to find out the number of months it will take you to breakeven. If that number is considerably less than the number of months you plan to be in your home, then it is probably a good move to refinance. But if you plan to move or payoff your loan sooner than you will recoup the costs, then sticking with a slightly higher rate for the time being is the better move.
Be sure to check out the No Closing Cost refinance from Local Mortgage. This is a great way to take advantage of lower rates without paying any upfront costs or increasing your loan balance to cover closing costs. Borrowers enjoy the immediate savings of the lower interest rate with our No Closing Cost refinance program.
Your Credit Improves
Any homeowner that has gone through the mortgage process is probably aware that credit scores have a major impact on the financial details of a mortgage. If you had a below-average credit score and payment history when you bought your house, then your mortgage may have a high interest rate compared to similar mortgages taken out at the time. Of course, higher interest rates correspond to higher monthly payments, meaning that a low credit score can cost you money when you get a home loan.
Luckily, refinancing gives you a chance to change your interest rate and lower your monthly payment. When you apply to refinance, lenders will reassess your financial circumstances and offer you a loan that better reflects your current situation. Therefore, if you have improved your credit score since you took out your home loan, then it might be a good time to refinance and obtain a lower interest rate. Doing so will help you save money on your monthly payments. Just remember to consider the costs associated with refinancing to get an accurate idea of how much money you will save in the process.
You Want to Start a Home Improvement Project
One of the best parts of buying property rather than renting is getting the chance to build equity in your home. Equity is a powerful financial asset that improves your net worth and helps you establish a stable financial foothold. That said, home equity is not a very liquid asset, which means it can be difficult to actually utilize the equity you have built up thus far in your mortgage. Refinancing gives you a way to tap into that equity and use it for things such as home improvements.
Next time you imagine renovating your kitchen, adding space to your home, or improving your property in another way, consider a cash-out refinance option to pay for the project. While the size of your bank account may make it seem like you can’t afford to improve your home, you might not be considering your home’s equity. By refinancing, you can pull cash out of your home and make home improvements affordable.
Refinance with Local Mortgage
Hopefully this article has helped you understand some key times to consider refinancing your home loan. Explore the Resource Center if you would like to learn more about no cost refinance, discover different types of mortgage products, or get a better idea of how interest rates affect you. As always, feel free to contact a Local Mortgage expert to discuss any of your questions about home loans.