Your mortgage may be one of the biggest and most important investments you make in your entire life and could also help you reach your future financial goals. A mortgage refinance can be a wonderful tool to help you potentially reach those goals sooner.
But is it the right time to refinance? Here’s a reference guide to help you decide if a refinance of your current mortgage is right for you.
Interest Rates are Historically Low
Interest rates fluctuate periodically. The 30-year mortgage rate spiked as high as 18.6% in 1981 and fell as low as 3.3% in 2012. Today’s rate is now near historic lows, and in August 2020, actually fell to 3.19%.
Depending on when you purchased your home, there’s a good chance that the current interest rates are lower than your existing mortgage.
That means that now may be the perfect time to refinance your mortgage, before rates rise again and potentially eliminate one of the biggest benefits for refinancing a mortgage – lower interest rates and lower overall payments on your mortgage.
The sooner you begin the refinance process, the faster you can lock in lower interest rates. Waiting too long could leave you without a really good reason for considering a refi loan.
You Want to Reduce Your Loan Term
Circumstances change. Perhaps you have a better job. Or maybe you’ve inherited money from a relative – or even taken home one of the lesser lottery prizes and hope to reduce the length of time (and overall money) you’ll pay for your home. Refinancing from a 30-year mortgage to a 15-year mortgage can save you huge amounts of money on your home. We’re talking tens of thousands of dollars, if not more.
On the flip side of the equation, some people need to extend the terms of their mortgages to create a little budgetary wiggle room each month. In this case, you might consider going from a 15-year mortgage to a 30-year mortgage. It will cost considerably more in the long run. However, it may be the difference that allows you to keep your home when things get tight.
Switching from an Adjustable Rate Mortgage to a Fixed Rate Mortgage
This is definitely a worthwhile consideration for people who have adjustable rate mortgages facing reassessment soon. With interest rates as low as they are, if you’re an adjustable rate mortgage holder, you could end any speculation or worry you may have about fluctuating rates by switching to a fixed rate.
You may pay a little more, initially, as an interest rate, but may gain incredible peace of mind – the kind of peace of mind that comes from knowing your interest rate can’t suddenly rise sufficiently to price you out of your home.
Home mortgage refinance loans can, in the right circumstances, be the perfect solution for many mortgage woes. The more you know about your options, the better informed decisions you can make about your personal need for a refinance loan and the best type of loan to meet your needs without creating pain in other areas of home ownership.