You probably won’t think about refinancing your home until you need to borrow against it or need to reduce your mortgage payment. It is easy to miss out on significant savings opportunities. If you are unsure if a mortgage refinance is right for you, check out the six signs below that indicate it might be time to look into it.
Is Your Rate Higher Than Current Mortgage Rates?
Interest rates are constantly changing, and one percentage point on a 30-year mortgage can amount to a significant difference in the total interest you pay over the life of the loan. If you notice your current rates are lower than what you are paying, it may be time to check out refinancing options.
Has Your Credit Score Increased Since Your Closing?
Your credit rating can play a significant role in what types of loans you qualify for and the interest rate your financial institution gives you. If your credit score has increased since the closing date of your mortgage, especially if it jumped you to a new tier, refinancing can get you a better-fixed rate and lower your overall interest.
Do You Have an Adjustable Rate Mortgage?
Adjustable rate mortgages are a good option for borrowers who want to start with a lower monthly payment and may have difficulty getting a fixed-rate loan. Once your fixed-rate has changed to the adjustable period, there is a chance that you could end up paying a lot more interest so refinancing to a fixed-rate when interest rates are low is a good option.
Do You Have a Lot of High-Interest Credit Card Debt?
You do not want to get into the habit of borrowing against your home to pay down revolving debt. If you accumulated a lot of high-interest credit card debt, refinancing the amount against the equity in your home can save a significant amount of interest over time and help protect your credit score.
Did You Start with an FHA Loan?
FHA loans are great options for borrowers with a lower credit score and little money for a down payment. Once you have owned your home for a while, you establish some equity. If your loan has reduced to about 80% or less of the value of your home you might be able to refinance, lower your interest rate, and possibly drop your mortgage insurance once and for all. Read more about getting rid of PMI here.
Do You Have a 30-Year Mortgage and Want to Pay it Off Quicker?
If you are in a situation where you can afford a higher monthly payment, and interest rates are low, you may want to look at refinancing to turn that 30-year loan into a 15-year loan and pay your mortgage off quicker. Read more about 15 year vs. 30 year mortgages here.
There are plenty of options available to refinance your mortgage that can save you some money and reduce interest in the long run. Do your homework and refer to your financial professionals to help you along the way!
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