Should I Refinance?
Since interest rates are still historically low, now might be a good time to reassess your current mortgage to determine whether you would benefit from a refinance. Here are some factors to consider when deciding if you should refinance your home loan.
Refinancing would probably be a good idea if you want to:
- Refinance from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage to secure a stable interest rate and monthly payment.
- Change to a shorter-term loan to pay off your mortgage faster (example: 15-year note instead of 30-year).
- Secure a lower mortgage rate and a lower monthly payment.
- Reduce your interest rate because it is higher than what is now available.
- Make a higher monthly payment on a shorter-term mortgage so you can pay off the loan and build equity more quickly.
- Extend your current loan term to lower your monthly mortgage payment.
Here are some things to consider before you refinance:
- By refinancing you’ll have to go through the loan approval process again, just like you did when you purchased the home. Your debt-to-income ratio and credit score will have to be re-evaluated.
- By refinancing you will have to pay the closing costs, appraisal, credit report and other fees.
- You’ll need to have at least 10 to 15% equity in your home to have an easier time qualifying for a new loan.
- If you have less than 20% equity in your home when refinancing you will be required to pay private mortgage insurance (PMI).
- By refinancing to pay less interest, your tax deduction may be lower.*
* PrimeLending is not authorized to give tax advice. Please consult your tax professional for tax advice for your specific situation.
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