Refinancing one’s original home loan is a very common occurrence. Very few loans have restrictions/penalties for refinancing, so you are free to consider loan options that better meet your needs. Here is a summary of the most common reasons to consider refinancing.
- Rates are lower than your original rate. If the amount you can save divided into the refinance costs results in a monthly “breakeven period” that is shorter than the time you plan to remain in your home, you should probably consider a refinance.
- You were originally required to have mortgage insurance because you put down less than 20% but now your home value has appreciated such that you now have at least 20% equity. With a new loan you can eliminate mortgage insurance and probably lower your rate also.
- If your original loan was a fixed/adjustable hybrid, it may have entered its adjustable rate phase. If you plan to stay in your home for more than a year or two you should consider refinancing to a traditional fixed loan or to another fixed/adjustable hybrid.
- If you have gained substantial equity in your home since you purchased it you have usable equity that can be borrowed and used for other purposes, such as home improvement, investments, assisting children with higher education costs or home down payments, etc.
There are many pros and cons of refinancing and then many options to consider once the decision to refinance has been made. Our job is to assist you in successfully navigating the options to achieve the best result.