When It May Be a Good Time to Refinance Your Mortgage
Interest rates for home loans hit a near-record low in 2020 and it looks like we are starting off 2021 with low rates as well. That means refinancing your home loan could greatly benefit you depending on your circumstances.
A quick housing market note. Mortgage rates have been known to change based on a few different factors:
· Health of the of the labor market (employment and wages)
· Inflation
· Federal Reserve activity
· Supply and demand
· Home buyer credit worthiness
· Loan terms (Fixed rate versus adjustable rate)
Let’s take a look at a few examples when it may be a good time to refinance your mortgage.
1. When Interest Rates Have Lowered
Historically speaking, interest rates are at a near-record low. And a lower interest rate means lower payments. Check out your current mortgage rate and compare what the market is at now.
How to find how much interest rate you’re currently paying: If it’s been some time since you’ve had to find your interest rate, you should be able to find it on your current mortgage monthly statement.
2. When Your Credit Score Has Improved
Your credit score played a role in deciding your first mortgage rate. If your credit score has improved from the first time you applied, refinancing could lower your rate, which will reflect in your monthly payments.
From a previous post, Why Should I Care About My Credit Score? we covered a lot of reasons why a good credit score is important. Our VP of Real Estate, Larry Jackson, states:
“Having a low credit score means you could ‘pay as much as double what someone else is paying just by having a low credit score and being recognized as a higher risk.”
What an improved credit score means: You’ve been more disciplined at making on time payments to your lenders or paid off a debt that has been sent to collections. Credit scores range from 320-900.
Need to work on your credit score before refinancing? Read 5 Ways to Improve a Credit Score.
3. If It’s Time to Switch Mortgage Types (Fixed Rate vs. Adjustable Rate)
Fixed rate mortgages can be a great, long-term way to keep a good rate. However, if interest rates were on the higher side when you purchased a home or, if you’re unsure about whether this is your “Forever Home”, switching to an Adjustable Rate mortgage could be right for you.
Same goes with switching from an Adjustable Rate to a Fixed Rate.
4. If You Need to Access Your Home Equity or Pay Off Debt
One of the most popular reasons borrowers refinance their home loan is to use the equity they have in their property to borrow money for many reasons. Whether it’s:
-To renovate your current home
-To have accessible money for investing
-To pay off other debts
-To have funds for larger purchases, like buying a car
Refinancing your home loan could make any of your current financial goals a reality.
Feel like it’s time to refinance your home loan?
Contact your mortgage loan officer to begin the process or go to your home loans lender’s website to get started.
If your home loan is with the credit union: You can start the home loan refinance process online. Questions? Our team of experienced Mortgage Loan Officers are here to help at 1-877-269-4179 or realestate@abecu.org.
Interested in becoming a member of the credit union?
Becoming a member of the credit union means better rates, lower fees and a wide range of products to fit your everyday financial needs (and the no-so-everyday ones, like home loans).
