With interest rates so low, many people are wondering if now is the time to refinance their existing mortgages. Read on for our tips to help determine if it’s in your best interest to take advantage of these low rates.
Getting a 1-2% drop in interest rate can make a big difference in your monthly budget and help give you the ability to pay off your mortgage faster. But, just because rates are so low, it doesn’t mean you should roll all your other debt, such as credit cards, student loans, personal loans, etc., into your refinance mortgage. Pay off your smaller debts first. Lumping them into your mortgage means it’s going to take longer to pay off those loans and your mortgage as well.
When Should You Refinance Your Mortgage?
When you have an Adjustable Rate Mortgage (ARM): Rates can adjust based on the mortgage market, LIBOR market index and the rate at which ARMs transfer the risk of rising interest rates to the homeowner, which can cost you in the long run.
The length of your mortgage is over 15 years: If your original mortgage was for a 30 year term, refinancing is a good way to lock into a shorter term. However, if your interest rate is low enough on a 30 year fixed rate mortgage to compete with the 30 year fixed rates, do your research and make sure the shorter term isn’t going to end up costing you more.
You have a high interest rate loan: If your current mortgage has a higher interest rate than the current market, refinancing could make sense if it lowers your rate and shortens your repayment schedule. A rate that is 1-2% lower than your current mortgage rate is when you should start to consider a refinance. Additionally, the longer you plan to stay in your for, the more time it will give you to make up for closing costs.
Is Refinancing in Your Best Interest?
Refinancing your mortgage is a good idea if it helps you have a better handle on your monthly bills. However, it wouldn’t be wise to refinance (and incur more debt) because you want a new car or plan to pay off credit card bills. When you use up your home equity, it can put your home at risk if you lose your job or experience other financial difficulties.
Ready to Refinance?
Contact our Loan Department at 508.679.0197 x419 to schedule an appointment or learn more about our mortgage rates here. Secure your financial future with us.