According to a recent Harris Poll survey, 8 in 10 Americans say buying a home is a…
Let’s face it, folks. This year has been, well, interesting to say the least. Economic ups-and-downs, combined with public health concerns & other big changes, have made 2020 the Year of the Question Mark.
One big question I’ve heard this year, maybe more than any other, is this one: Is now a good time to refinance my mortgage?
Like most things in the mortgage industry, the answer depends on your unique situation. So, let’s dive in & explore what you need to know about refinancing your mortgage.
What’s happening now affects tomorrow
What do I mean by this? Well, an economic decline may not last forever, but the impact on lending & interest rates can certainly linger on. If you’re buying during a tricky time, it helps to know what the long term impacts may be on your mortgage.
Whether it’s a pandemic or market crash, these events can eventually change the way you borrow funds for a home. But sometimes, things can change for the better.
Take this year’s COVID-19 pandemic as an example. In this case, the Federal Reserve (FED) lowered interest rates to help buyers get homes. Lowering interest rates also helped current homeowners stay in their homes.
How, do you ask? One big reason:
- Lower rates = better refinancing. The FED cut interest rates this year to minimize problems in the housing market. So far, it’s worked. Now, many homeowners are refinancing their mortgages to get smaller monthly payments. You could join them!
You’d think that a pandemic would make it harder to stay in your home, in terms of interest rates, but in this case, it’s the opposite. Lower rates often mean smaller monthly payments. Check with your local mortgage broker to see whether it’s a good idea to lock in these lower rates with a refinancing package.
A few things to keep in mind
So, is now a good time to refinance a mortgage? No two situations are alike. Try thinking about the following questions before speaking with a local mortgage broker:
- Do I need cash right away?
- Can afford to stay in my home?
- If not, would refinancing for smaller monthly payments help?
- Do I want or need work done on my home?
- Do I want to shorten or lengthen the term of my loan?
- Am I hoping to switch from Fixed to Adjustable Rates, or vice versa?
If you answered yes to at least one of these questions, now is a good time to refinance, and you should speak with a broker for more information about your circumstances.
Let’s explore some of the more common reasons homeowners refinance in the next section.
Why do people refinance their mortgages?
There are several reasons, and we’ve just explored a big one earlier on—smaller monthly payments. Yet, there are other reasons why you may wish to consider refinancing your current mortgage.
Some refinancing options let you borrow against your home’s equity, which is how much value your home has. Equity is your home’s value subtracted by what you owe. See below for an example.
Let’s say you owe $100K toward your loan, but your house is worth $250K, you could theoretically borrow $150K in equity.
This equity is then rolled into your new loan, so you get the cash, but continue paying off that cash in monthly installments. So, what are some reasons to tap into your home’s equity?
- I need cash right away. Financial emergency? A kid in college? Big purchase or life event requiring funds right away? These are just some of the reasons
- I need work done on my home. There are refinancing packages that can help fund your home improvement projects.
- I want to change how long I have this mortgage. OK, so you borrowed at a 30-year term, but after a while, you decide to pay it off in 15 years. Sure, you’ll have larger monthly payments, but a refinancing option could get you there.
- I want to change my rate structure. Let’s say you have a fixed-rate loan that’s coming to an end. The loan is still there, but now you want to switch to an adjustable rate. You can do that by refinancing.
Remember, you don’t need to refinance with the same lender! If another lender has the refinancing package that works best for you, it’s possible to get it.
That’s where mortgage brokers come in! We find great rates & loans for you.
Let’s guide you through this
Refinancing a mortgage can be a big decision, especially if you’re going through a rough time. That’s why it’s important to have a local professional who you trust to give you accurate information that puts you first.
So, now that you’ve read this, is now a good time to refinance your mortgage? Let’s find out together. We have the tools & resources you need to refinance, whether it’s for better rates, smaller payments, or cash when you need it.
Get in touch to discover all the options waiting for you.