Knowing When It’s Time to Refinance Your Home

Considerations

When you’re considering refinancing, it is important to do your research and crunch out the numbers to make sure that the deal is better over time as opposed to being beneficial short-term. Interest is the silent killer when it comes to refinancing homes; so planning into the future and weighing out scenarios is essential when you’re considering refinancing. This being said, there are major benefits to refinancing with the top three being lower interest rates over time and the opportunity to reduce the term of your original mortgage through standard refinancing, and to acquiring cash from the home’s equity value to use on other purchases through cash-out refinance transactions.

So once you figure out that refinancing is for you, when exactly is the best time to refinance your Mortgage?

How Much Does it Cost to Refinance a Mortgage?

You’ve done your research on the best time to refinance your mortgage, and you are ready to start the process before the Federal Reserve decides to start raising interest rates. It seems like everything else is in place: you plan on staying in your home for a long time, lending conditions have eased, and current mortgage rates are low. Refinancing or “resetting” a mortgage is a great option for home owners who want to take advantage of market conditions like lower interest rates over time, take the opportunity to reduce the term of their original mortgage, or acquire cash from the home’s equity value to use on other purchases through cash-out refinance transactions. Homeowners can also benefit from refinancing by reaping the rewards of an improved credit standing in most situations.

Costs

But how much does refinancing your mortgage actually cost? One thing that most homeowners forget to consider when considering a refinance is that there are fees associated with the process. These fees vary based on location and company, which is why it is essential to shop around before you refinance your mortgage. Below are some fees to keep in mind and to discuss with your lender before making a refinance decision:

Your credit report = Your financial report card.

You want all A’s – Like we mentioned before, your credit score is a representation of how well you can handle your money, and can make or break a lender’s decision to approve you for a loan or mortgage, and impact your interest rates majorly. Your credit report is made up of how much money you’ve borrowed, your history of paying it back, and how much open credit is available to you. Here is what appears on your credit report: debts and a history of how they’ve been paid, public record information (tax liens, bankruptcies), bills referred to collection agencies, and inquiries made about your creditworthiness.

Credit Score

Credit scores range from 300-850 points and are based on debt, amount of time you’ve used credit, debt totals, how often you apply for new credit, and types of credit you currently use based on information received from your credit report.! Having good credit is essential for having a healthy financial presence. So now that you understand how vital it is, check out these tips for improving your credit before shopping for a mortgage!

Closing Fees

Once you have been approved for your refinance, closing fees come into effect under names like paperwork fees, attorney review/closing fees, or closing costs. These can get pricey, so it is important to take them into consideration before applying.

Other Fees

It is crucial to understand the terms and conditions of your refinance like the back of your hand. Discuss with your loan officer things like prepayment penalties (fees that can cost anywhere from 1-6 month’s interest payments) that charge you for paying off your existing mortgage early, and other penalty fees that could impact you financially.

No Cost Refinancing?

Most mortgage-related fees are paid upfront at closing, however some lenders offer “no-cost” refinancing, which includes these fees in your loan balance or interest price during the term of your refinance. Once you take into consideration all of the fees that will be associated with your refinance, calculate the break-even point of your new mortgage through online resources. If the refinance still makes sense financially, sign the papers! If you’re feeling overwhelmed, don’t fret. The Home Ownership and Equity Protection Act (HOEPA) protects those who refinance from high fees and interest rates. Alpha Mortgage is proud to serve North and South Carolina with the best mortgage rates and informed loan officers. Need more information about refinancing your mortgage? Contact us today.