Are you unsatisfied with your monthly mortgage payments and want to learn more if refinancing is for you? Read up on these five things to know before deciding if refinancing is the best option for you.
Make sure you know what you want when you refinance. Do you want to pay less interest over the length of your loan or reduce your monthly payments? Communicate with a loan officer about which is the best option for you.
In order to refinance your home, you need to determine the value of your home. Owning at least 10% of the equity on your home will make it easier to qualify for a new loan.
Having a good credit is essential to refinancing your home. Your score determines the likelihood of being qualified for a loan with a lower interest rate during refinancing.
Typically, it costs 3% to 5% of the loan amount to refinance a home. If you have enough equity, the new refinancing costs can be rolled into your new loan. Lenders can offer a “no-cost” refinance which increases your interest rate to cover those closing costs.
When deciding if refinancing is best for you, look at the break-even point which is “the point at which the costs of refinancing have been covered by your monthly savings,” according to Investopedia.com. After finding out your break-even point, that is when your monthly savings become yours. For example, if it will cost $1,000 to refinance and you are saving $50 a month from the previous loan, it will take 20 months to regain your costs. If you plan on moving or selling your home within two years, it might not be worth it to refinance.
If you’re thinking about refinancing your mortgage and want to learn more about your options, contact a loan officer today!