Mortgage rates have been at record lows for quite a while and if you own your home, you might have thought about refinancing. Refinance loan volume jumped to the highest level since 2013 earlier this month. The current rate for a 30-year mortgage is 3.69%. So if your mortgage interest rate is higher than that, you could be paying too much. But, before you refinance your mortgage, here are some things to consider. 

How Are Your Finances? About 25% of mortgages are denied, most often for poor credit and too high debt-to-credit ratio. Before you consider refinancing, make sure that your credit score is solid, there aren't any errors on your credit report, and you have paid down or paid off debts to decrease your debt-to-credit ratio. 

How Long Will You Own This Home? Because mortgages are paid over many years, most of your payments will go toward the interest rather than the principal owed on the loan during the early part of your loan. If you're planning to sell this home within the next five years, you may save more money by keeping your current mortgage rate. 

If you are planning to live in this home forever, it may make sense to get a 15-year mortgage rather than a 30-year mortgage. Rates for 15-year mortgages are typically lower (currently at 3.19%). While these loans have a higher monthly payment, they are paid off more quickly and you can save significantly in the long run. 

Can I Afford To Refinance? Be aware of the additional costs associated with refinancing, including appraisal fees, title fees, origination fees, and other closing costs paid to the lender to process your loan. You may be able to get these costs absorbed in your loan, but it will raise your monthly mortgage payment, and may make the refinance not worth it.

Am I Paying Mortgage Insurance? Home buyers must pay mortgage insurance if they have a Federal Housing Administration (FHA) loan, or if they have a conventional loan with a down payment of less than 20%. If you have more than 20% equity in your home, you will get the best deal when refinancing. If you don't yet have 20% equity, it may be better to wait. 





Posted by Jeff Sallan on
Email Send a link to post via Email

Leave A Comment

Please note that your email address is kept private upon posting.