• David Cade

Should I Refinance My Mortgage When Interest Rates Are Low?


With the news of record low interest rates, I am sure you are thinking like most homeowners. Is it time to refinance? This may seem on the surface like you should but let us break this down into easy steps to help you.


1. How long do you plan on staying in your home?

This is a critical part of deciding if you should refinance. Are you going to stay in your home long enough to breakeven on the cost of refinancing? If the answer is yes, then refinancing makes sense. Start with the cost of refinancing and then divide it by the amount of money you'll be able to save each month by refinancing. That will give you a rough idea of how many months it will take for your refinance to pay off.


2. Is my current mortgage rate high?

One of the best reasons to refinance is to lower your interest rate on your existing mortgage loan. A good rule of thumb is if can reduce your current rate by at least 1% then refinancing is probably a good idea.


3. Shorten the term of your loan

Another great option is when interest rates go down it gives you the opportunity to refinance your existing loan to a shorter term without much change in your current payment.


4. Has your credit improved?

Your credit score is a significant factor in determining your mortgage rate. Generally speaking, the higher your credit score is the lower the interest rate.


5. Your home has increased in value

If the value of your home has increased it might benefit you to consider refinancing. Some of the benefits would be removing PMI or consolidating your first and second mortgage. Maybe you have been planning a home improvement project or using the equity to consolidate other debts.


Do you have any questions? Give us a call anytime and we would be happy to help you.

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