Thinking about refinancing your current mortgage loan? Whether you are trying to lower your monthly payments, looking for an alternative loan type or term, or need funding for a renovation project, there are many reasons to refinance. If you have thought about refinancing but not sure where to begin, keep reading. Below we will discuss what refinancing is, what you need to know, and when the best time to refinance your home loan.
What is mortgage refinancing? Refinancing, in simple terms, means to swap out your current loan for a new one. Most people refinance their home to reduce the interest rate, monthly payment or to withdraw from their home’s equity. Others may refinance to pay off their home faster or find another loan term that is more suitable to their needs.
How does refinancing work? A lot of factors go into the refinancing process. Whatever your goals, you and your mortgage lender can put together a loan type and term that fits your specific need. Your options will be based on your eligibility, the state you live in, and your financial circumstances.
Are there closing costs? Yes, your closing costs are determined by many factors and every situation is unique. You will want to discuss the refinancing fees with your loan officer. Rates and fees can vary by many factors. Lower closing cost loans have a higher interest rate while the lowest rates will have higher closing costs. Get multiple options from your loan officer to see what option is best for you.
Other fees usually include:
Do I have to submit another loan application to refinance my mortgage? And will it affect my credit score? Just like when you applied for your current mortgage, when you refinance, you will have to submit an application. Your lender will review your credit score with a hard inquiry.
When is the best time to refinance? There is not a one-size-fits-all answer to this question because the “best” time to refinance will vary for each person. Typically, a good time to refinance is based on the current housing market and your unique financial situation. However, the odds are in your favor if you fall into one of these categories:
You have a good credit score. The better the credit score, the better the interest rate.
You have been in your home for at least a year. Many lenders will want you to provide proof of on-time mortgage payments for at least a year.
Your existing home loan has a significantly higher interest rate. Sometimes there are benefits by lowering your rate by just 50%.
You’ve improved the value of your property since moving in. If you have made renovations to your home that could’ve added equity, you could benefit by refinancing.
“Rates are at all-time lows. One of the biggest factors that increase rates is high inflation. The expectation is that inflation will continue to rise this year which will increase rates. We may never see rates this low again. Increased home values can also create opportunities to consolidate debt, remove mortgage insurance, or get cash out of the house.”- Kevin McDougal, President-Augusta Mortgage
If you are interested in refinancing your current mortgage but not sure when the right time is for you, please reach out to one of our lenders. We proudly offer a broad menu of affordable financing options and competitive rates. We will be happy to review your current loan and discuss your options.
Ready to get started? To begin, fill out an application and one of our team members will contact you.