Lender in Metro Detroit Explains the Best Time to Refinance
17% of U.S. homeowners with a mortgage on their primary residence refinanced in 2020, according to a September NerdWallet survey conducted online by The Harris Poll among 1,413 U.S. homeowners.
Refinancing and lowering your interest rate by 1–2% can make a huge difference in your monthly budget and help you pay off your mortgage sooner. But how do you know if it’s the best time to refinance?
In most cases, now is a good time to refinance your loan as rates are still at historical lows. But there are some other considerations besides the current rate.
How long do you plan on staying in your home?
A refinance may not make financial sense if you plan on moving in the next year or two. Calculate your closing costs and compare it to how much you will save each month to see if refinancing is the best decision. Consulting with a lender can help you get a professional perspective on your unique situation.
What’s your credit rating?
Although interest rates are low, having a lower credit score may result in a higher mortgage rate.
How much interest is being paid during the remainder of your current loan?
When you refinance your mortgage you are essentially starting over with a new loan product. This means if you have lived in your home for 20 years with a 30 year fixed loan, refinancing at a term of 30 years will be adding time on the mortgage.
Refinancing when you’re already halfway or more through a 30-year loan might not make financial sense if you have already paid a good portion of interest.
When Refinancing Makes Sense
You have a high interest loan
If you had any blemishes on your credit report when you applied for your original loan, you may be paying a higher interest rate. If your financial situation has since improved, then refinancing could be a smart financial move if it lowers your interest rate or shortens your payment schedule.
You have an Adjustable Rate Mortgage (ARM)
It may be worth locking into a fixed low rate to avoid the risk of payments going up when the rate increases.
You have high interest credit card debt or other loans
At the end of the day you will need to calculate how much money you will be saving. If you are currently carrying high interest consumer debt, lowing your mortgage payment can help you pay off these debts sooner and avoid overpaying in interest.
You want to shorten your loan term
If your original mortgage is a 30-year term, then refinancing is a good way to lock in a low rate for a 15-year mortgage which will ultimately save you from paying more in interest.
Ready to Refinance? Contact Julie Krumholz, Lender in Metro Detroit
Julie Krumholz, is an Metro Detroit home lender at Superior National Bank. With over 35 years in the mortgage industry, Julie’s goal is to provide the best possible mortgage experience and the most competitive rates. Julie has vast experience in refinances and purchases including FHA loans, VA Loans, USDA loans, portfolio loans, MSHDA loans and more.