Four questions to ask yourself before you refinance your mortgage.
With mortgage rates at their lowest point in years, you might be asking yourself if now is a good time to refinance your home loan. You’re not alone. According to the Mortgage Bankers Association, in early February, the volume of refinanced loans was at the highest level since 2013. Here are four questions to ask yourself before you join those homeowners who refinanced.
How Long Will I Live in This Home?
Time is one of the most important factors to consider before refinancing a mortgage. If you’re planning on moving within the next five years or so, a refinance might not make financial sense due to the fees you’ll end up paying to complete your transaction. You want to keep your loan long enough that your monthly savings are greater than the fees that come with the refinance.
What is My Credit Score?
Remember to make sure that your credit score is as high as possible before going through with a refinance. The better your score, the lower your rate. Rates are expected to stay low for the near future, so if you need a few months to get your score in shape, you might want to take it.
How Much Will I Save?
Before you refinance, shop around for the best possible rate. Marketwatch suggests hunting for a new rate that is at least 50 basis points lower than your current rate. Once you find an appealing offer, do the math to make sure the savings are worthwhile.
Will My Lender Work With Me?
Speaking of shopping around, don’t ignore your current lender. They already have all your information, so if they can offer a good rate — particularly if the window since the last time you financed (or refinanced) is short — it’s possible this refi will be a much simpler process.
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