With interest rates rising, most people are not thinking about refinancing. However for some, it may make sense. Here are some questions to ask yourself first.
-Do I have enough equity in my home? To avoid mortgage insurance, you need at least 20% equity in your home with a conventional mortgage. So if you owe $200,000, your home will need to appraise for at least $250,000. For some with FHA mortgages, it may be a good time to check to see if you can refinance to a conventional mortgage and get rid of your mortgage insurance. Even if the interest rate is the same, you may save a lot on your monthly payment by eliminating mortgage insurance.
-How’s my credit? Check your credit, the higher your credit score the better. Most lenders have requirements that you will need to meet.
-What do I want to accomplish? Why are you thinking about refinancing? Do you want to go from a 30 year loan to a 15 year? Your payment may be higher but you will save thousands in interest by paying it off sooner. Do you want to get some cash out to make some improvements? Do you have an adjustable rate loan that you want to change to a fixed rate loan? These can all be good reasons to refinance your home – even if the payment may be higher.
-How is my current loan? Do you have a fixed rate loan or an adjustable rate? If you have an adjustable rate, you may want to refinance to give yourself the security of a stable payment. If you are thinking about a shorter term, look at your interest rate – can you pay extra? If you go to a 15 year term, will the new interest rate be higher, if so, it may not make sense to do. Are you thinking about moving soon? If you are thinking about moving in the next 3-5 years, it may not make sense to do anything.
Once you answer these questions, if you still aren’t sure, contact your loan officer. We can answer your questions and make sure it makes sense to refinance. For some it will, for others, it may not! But with interest rates looking like they are going to keep increasing, it’s a good time to think about it now rather than later!
Leslie Vanderwerf, NMLS ID#335509, American Mortgage & Equity Consultants, Inc., An Equal Housing Lender, NMLS#150953 – Email – Website
