Is It The Right Time To Refinance Your Mortgage? Get Answers To FAQs From Highly Rated Mortgage Brokers
Is it the right time to refinance your mortgage? The short answer is yes. Refinancing a mortgage is to pay off an existing loan by replacing the loan with a new one. Homeowners could refinance their mortgages in order to save money, but it has to be done correctly at the right time. The following is to discuss when it is a good time to refinance mortgages.
When Homeowner Could Get Lower Interest Rate
Interest rate is a big factor for how much money a homeowner should pay for his mortgage per month as well as how much money over the life of his loan; the lower interest rate on the loan that a homeowner could get, the less monthly payment that the homeowner should pay. One of the most common reasons for refinancing mortgages is to reduce the interest rate on the existing loan. As a rule of thumb, if a homeowner could reduce his interest rate on the loan by at least 2%, it is a good idea to consider refinancing the mortgage.
Currently mortgage rates are at a all time low. Rates have drop below 3% as stated in this article by the new York times. If you are looking at saving money on your current mortgage refinancing may be a great option for you. Over the life of your loan the savings can be substantial. Keep in mind that the rates vary based on multiple factors which we will be happy to review with you.
When Homeowner’s Credit Score Gets Higher
Usually, the interest rate that a homeowner pays on his loan is determined by two factors. One is the prime rate, and the other is the credit score of the homeowner. The prime rate is typically influenced by the market and set by the Fed referring to the lowest rate at which money could be commercially borrowed, and it is the base for the interest rate on a homeowner’s mortgage. However, there is a percentage added to the interest rate on the homeowner’s mortgage based on his borrowing history. In short, the higher a homeowner’s credit score is, the lower that percentage gets.
It goes without saying that if a homeowner’s credit score was not great when he got the mortgage, the interest rate should be fairly high. However, over time if the homeowner has taken action to better his credit score, he could become qualified for a lower rate. Thus, refinancing a mortgage could give homeowners an opportunity to access better rates and as such lower the monthly payment.
When Homeowner’s ARM Is Going To Adjust
The reason why ARM, adjustable-rate mortgages are very attractive is because they come with the initial low fixed-rate period, and in this period, the interest rate is usually lower than what could be found with a real fixed-rate option in the marketplace. However, once this initial low fixed-rate period has passed, the interest rate on the mortgage starts to adjust at the regular intervals.
Therefore, the interest rate on the mortgage will go in line with the current rate being offered in the marketplace, plus the percentage determined by the homeowner’s credit score. It makes sense for homeowners to refinance either for another ARM or a more stability fixed-rate mortgage.
When Homeowner Needs Money For A Large Expense
If a homeowner needs money for a large expense in his life, he could go for the cash-out refinancing mortgage. In this situation, the homeowner borrows more money than he currently owes on his home, and the difference gives him the funds to be used for what he wants. Because cash-out refinancing usually comes with a lower rate than a personal loan or a credit card debt, homeowners use this refinancing to pay for the big-ticket items.
Homeowner Needs To Pay Less On The Mortgage
Because of less income or more expenses, if a homeowner needs to pay less on his mortgage, refinancing the mortgage could help him to get some money back, especially given that the interest rates today are at historic low. As we mentioned early the rates are at a all time low.
The right time to refinance your mortgage is now. When looking at options be sure to call a trusted mortgage broker. Call us today for help with refinancing your mortgage.