When interest rates start to trend lower, homeowners start to ask themselves “is now the right time to refinance my mortgage?” While the obvious answer seems like yes, this may not always be the case. There are a few additional questions you should consider as you decide if refinancing is the best financial move for your current situation.
- Am I able to lock in a fixed or lower interest rate?
If you are able to lock in a lower or a fixed interest rate, it might be a good time to refinance especially if you have a variable rate mortgage. With a variable rate mortgage, locking in a fixed rate loan will protect you from having to pay a higher monthly payment in the case of interest rates rising. A fixed interest rate means you’ll make the same monthly payment for the duration of your mortgage.
- Will I be able to lower my total interest expense?
In general, paying less total interest over the life of a new loan versus paying the remaining term on your existing loan can be a good reason to refinance. Sometimes switching to a loan with a lower rate but longer term can result in more interest paid over the term of the loan even though you have lower monthly payments. Your mortgage loan officer will be able to talk you through this process and make sure your total interest expense on a new loan will truly be valuable to you.
- How much will I pay in closing costs? What other costs are associated with refinancing?
Even if you are able to get a fixed or lower interest rate, it may not be the best choice because of closing costs for the new loan. It is important to make sure the amount you would be paying in closing costs is not more than the benefit of the lower interest rate from refinancing. Other costs associated with refinancing your mortgage can be impacted by where you live, the type of loan, and the loan amount. With the new loan, there may be costs associated with a new appraisal fee, running a credit report, the title insurance, and any fees from closing. If the costs do not outweigh the benefits, you will likely want to consider refinancing your loan.
Alpha Mortgage is happy to help you decide if refinancing your loan is the best option for your current financial situation. For refinance consultation or to get a quick quote, call (910) 256-8999 or fill out our easy-to-use form to get a quick quote.