With mortgage interest rates dropping again, is it time to think about refinancing? There are some reasons that you should look at refinancing, but make sure it makes sense for you!
What's your current interest rate? If it's over 4.5-5%, you definitely should look into refinancing your home. It will depend on how long you plan to stay in the home. If you plan to be there for a few more years, it definitely makes sense to look into it. Some homeowners are looking at dropping their loans from 30 years to a 15 year and keeping the payment about the same with today's interest rates.
Do you currently pay mortgage insurance? If so, think about refinancing to try and eliminate the MI. If your home has gone up in value enough, you may be able to eliminate that payment. Another option may be to try and at least lower that payment. Home values have increased over the last couple of years, so that you may be able to eliminate that part of your payment.
Do you have an FHA or VA loan? You may be able to do a streamline refinance and keep your costs down. With an FHA loan, you may have to watch the mortgage insurance, but it can be an option. VA refi's definitely make sense if you are planning to be in the home for a couple years. With both loans you can do a no cost refinance and keep your closing costs down by using a slightly higher interest rate to help cover the closing costs.
Have you been turned down for a refinance over the past few years? If so, you may want to try again. With rates lower and home prices increasing you may be able to qualify for a refi now. There have also been some underwriting changes that may allow you to refinance now if you were turned down in the last few years. It's worth taking some time to talk to a loan officer to make sure.
As always, we never know how long interest rates will be at their current level – it could be a day, a week or a couple months. So if you are in a situation where it might make sense for you to refinance now, talk to a loan officer and decide what makes sense for you. If you think you may sell your home in the next year or two, it may not make sense to do anything. If you are thinking about selling, now may be a great time to do that – with rates lower, it may make it easier for someone to buy your home.