In the housing market, there are multiple routes that an individual can go through. Mortgage refinancing is an option on the table that many like to utilize, as a homeowner can refinance and pay off several existing loans with one loan.
Moreover, the interest rates can be favorable from time to time, which lowers your payment and monthly expenses when executed right. However, even with its benefits, a mortgage refinance is a hefty decision that a homeowner needs to make carefully. Asking yourself several questions can be a good way to gauge whether you should go with a mortgage refinance.
Know When To Refinance Your Mortgage
- Is It Time to Refinance Your Mortgage? Even with a positive credit history, homeowners find themselves in a tight spot with their mortgage. Maybe you have large mortgage debt with several different lenders, or maybe the housing market has changed and created the need for a change in your mortgage. There are cases where you may feel like you are paying too much on your mortgage or that you are getting insufficient interest. If you’ve verified that either one of these is true, it typically indicates that it’s time to consider a refinance.
- What Is Your Break-Even Point? It is paramount to consider the break-even point when considering refinancing your mortgage. The break-even point is how much you can save from a refinance versus how much you would spend on the refinance. Discuss with a mortgage specialist if your break-even point is viable. Ideally, you would want to refinance if you would get higher savings than expenses in the long run. However, this isn’t always the case. Without an existing sum of money in savings, you might have to wait until you can have an adequate down payment on your refinance.
- What Is The Ideal Mortgage Rate? Discuss and decide on your ideal mortgage rate with a specialist. When you determine this rate, you should aim to target a rate within this range. If your current mortgage rate is quite higher than your ideal rate, you’ll want to refinance as soon as possible. On the other hand, if your current mortgage rate is lower than your ideal rate, then you should consider whether or not it is worth it. Although you’ll indeed be saving money, you might not be able to afford the higher payments if they are too high.
- What Are Alternative Options? Following the point above, if a mortgage refinance doesn’t seem all too viable, you need to consider what alternative options are available. Discussing with a specialist will surely give you insight into your situation and eventually point you in the right direction. Are there other loans, such as home equity loans, that you can obtain to replace your current mortgage? Is it possible that you can just add additional payments to your monthly mortgage to make your payments more affordable? Explore and see what fits your situation.
Your Mortgage Team at Mortgage City
To sum it up, knowing how to evaluate your mortgage refinance situation will allow you to conclude what you need to do. Remember that you’ll want to be realistic about your situation and get professional input on where you stand and what to do next.
Searching mortgage refinance rates? Mortgage City is a licensed mortgage originator in Michigan, Florida, New Hampshire, Ohio, Massachusetts, Texas, California, Indiana, and Colorado that aims to inform and assist homebuyers with navigating their mortgage needs. Call us at (248) 930-8709!
