Historically low mortgage rates have homeowners thinking refinance. Here's what you need to know...
Thinking of refinancing?According to Freddie Mac’s Weekly Primary Mortgage Survey, interest rates this week (July 22) averaged 4.56 percent. Many homeowners thinking of refinancing their mortgage to get a lower rate thinking they will benefit by saving money. This could be true and a smart move for some, but everyone should take a couple steps to determine their goals and assess the benefits of refinancing. Here are a couple initial steps to take when considering a refinance:
How long do you intend on owning the home? Will you be selling after a couple of years or are you planning on keeping the home for a long period of time?
What is your goal? Is it to lower your monthly payment or reduce the amount of interest you pay the bank over the life of the loan? Or are you getting cash out at closing?
How will you pay your closing costs when you refinance? Will you include them in the new loan or pay them out of your pocket at the time of closing?
How long will it take you to actually realize a savings when you refinance? With your new monthly savings how long will it take to recoup the cost of the refinance, one year, two years or longer?
Will you pay less interest to the bank over the life of the loan by refinancing? Will you be in the home long enough to see an actual interest savings?
These are just a few questions to consider when someone is thinking of refinancing their mortgage.
There are many free tools to help homeowners answer these questions. Here is a link to a mortgage calculator that will help you do the math! -- Shannon Peer