Refinancing requires more than just finding the lowest mortgage rates. From knowing your plans around living in your home to down payment and loan term, plenty of things need to be considered to make an informed decision. Is now a good time to refinance my mortgage? Learn what experts have to say about it.
When mortgage rates are down, you may think that it’s the best time to refinance a mortgage. Although it’s a good idea since it will help save money, you need to research more to find an answer to the ‘when should I refinance my home’ query.
Experts predict mortgage interest rates to increase in 2021, but they will remain low compared to last year. Right now, the average interest rate is 3.32% (for 30 years) and 2.68% for 15 years. All this means refinancing now can result in significant savings.
However, the big question is still the same: Should you refinance now?
When is the Right Time to Refinance
The common trigger that makes people think of refinancing is low interest rates. But, there are other reasons too to refinance:
- When you want to repay the loan with a shorter term.
- When the equity in your property is enough to refinance.
- When you plan for a cash-out refinance.
Apart from these, some people go for refinancing when they wish to shift from an adjustable rate to a fixed rate or eliminate PMI.
How Does Refinancing Work
When you refinance, a new loan replaces your existing mortgage. You have to follow the same procedure again: Send an application to apply for a loan, underwriting, and closing. The only difference is that you don’t buy a new home and keep the current one.
Similar to the process when you apply for a loan for a new house, you have to meet several lender requirements, such as employment history, credit score, and debt-to-income ratio. Apart from these, you must have enough equity in your home.
Also, when you refinance a mortgage, you can hire your original lender or go for a new one.
Why Should You Refinance Now
Is this a good time to refinance? Experts say, “Yes”. Here are some reasons why:
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Low Interest Rates
Although it’s not the biggest factor, current mortgage rates make it worth considering. Current interest rates aren’t as low as they were during the pandemic, but they are good compared to the pre-pandemic time.
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Economic Recovery
Last year, the COVID-19 pandemic led the world to a recession, resulting in economic uncertainty. Right now, the world economy is on track to recovery. Those interest borrowers who were planning to refinance last year can take their chance now.
In the End
Now that you have found an answer to the ‘is now a good time to refinance my mortgage’ question, explore your options and find reliable lenders. All the best!
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