Mortgage rates remain at record lows. Consequently, many borrowers are refinancing at a higher frequency than ever before.
While refinancing your home may seem like a no-brainer, there are certain things that you’ll want to consider when deciding whether this option is right for you.
Factors to consider when deciding whether to refinance
If there is less than half a percentage point difference between the last time you refinanced and now, refinancing may not be the best idea for you. You may also want to delay refinancing your mortgage if your credit score has decreased since you last refinanced.
Refinancing may not be the best choice for you if you have less than 20% equity in your home. Closing costs are typically 1% to 2% of your home value. You may want to delay refinancing your home’s mortgage if you cannot comfortably cover those costs.
You shouldn’t default to using your current lender simply because you’re familiar with them. They may not necessarily offer the best rate available. A recent study published by Lending Tree highlighted how homeowners often end up paying as much as $66,000 in additional lifetime interest by securing only one quote. This is why financial analysts often recommend that borrowers get at least three quotes instead.
One detail that you’ll notice when getting quotes from various lenders is how each offer may be drastically different depending on how much information you give each potential lender about your financial situation. You should pay careful attention to the difference between the interest rate and APR. The APR is the combination of the interest rate and other fees tacked on to your loan.
Is refinancing your mortgage right for you?
You shouldn’t rush to refinance your home mortgage without first reviewing your financial situation and the different options out there. You may find it helpful to consult with an attorney about this money-savings option to determine whether refinancing is the best choice or something else is more appropriate for your situation.