Is it a good time to refinance your home?
Consumers home loans
Many homeowners wonder if now is a good time to refi. It might be! Here’s what you need to know to decide.
While mortgage rates have fluctuated the last several weeks, they are still at historic lows. The low rates are in part due to rate cuts the Federal Reserve made in March to protect the economy from the effects of the COVID-19 pandemic. For you, this may mean it’s a good time to refinance your mortgage.
What a mortgage refi means for your bottom line
For homeowners, there can be several benefits to refinancing:
- Lower monthly payments allow you to put the savings toward other things.
- Lower interest rates may mean that more of your payment goes toward principal, helping you build equity faster. This depends on how long you’ve had the current loan and your current loan rate.
- If you have an adjustable-rate mortgage (ARM) and plan to stay in your home long-term, switching to a fixed-rate loan means you no longer have to be concerned with the ups and downs of mortgage rates.
- Refinancing your mortgage is an opportunity to tap into your home equity without having to sell. This is called a cash-out refi.
With a cash-out refi, the new loan pays off your old mortgage, and you get cash back to use however you want. Generally, you can refinance up to 80% of your home’s equity. Some people use the cash to better position themselves in the face of uncertainty. For example, they may pay off high-interest debt, consolidate debts, make a large purchase, catch up on retirement savings or set it aside for emergencies.
When does mortgage refinancing make sense?
No two homeowner situations are alike, so there’s no definitive rule on when to refinance.
Keep in mind, refinancing a mortgage means a brand new loan is issued and you’ll have to pay closing costs. These may be rolled into the new mortgage, lowering your out-of-pocket costs at closing.
The best way to decide if refinancing your mortgage makes sense now is to run the numbers. Use our Mortgage Refinance Break-Even Point Calculator to see if refinancing will save money for you. You’ll need to gather some info to get started:
- Your current mortgage monthly payment and balance
- Current interest rate of the loan you want
- Estimated closing costs; usually 1%-3% of the new loan amount depending on how large a loan you are considering
If you’re planning to stay in your home longer than the break-even point, refinancing is a smart money move for you.
We’re here to help
You don’t have to figure everything out alone! Even though the stay home order is still in place, our mortgage loan officers are here to help you refinance your home mortgage. Give us a call at 800-991-2221 to get answers to your mortgage refinancing questions.
Consumers helps more than 1,000 members finance land, first and second homes, and home improvement projects each year—even during the coronavirus outbreak. We’d love to help you with a mortgage or home equity line of credit; call us at 800-991-2221.