The coronavirus outbreak has disrupted a lot of activities including the banking sector. That’s why many people are asking themselves if this is the right time to refinance their mortgage loans or hold on little bit.
Considering the fact that mortgage rates are at their lowest, it makes sense to think that it is the best time to refinance your home loan.
However, there are several things that can be used to determine this. The first thing is to understand how long you plan on staying in your home. The other thing you should probably consider is your credit score as well as your financial goals.
When is the right time to refinance your mortgage?
In most cases, people start thinking about refinancing when they realize that mortgage rates are getting below their existing loan rate. But there are several other reasons for you to refinance besides the low rates.
They include the following:
• In case you want to repay the loan faster within a short period.
• If you have acquired adequate equity in your to refinance without the need of mortgage insurance.
• If you would like to tap your home equity with cash-out refinance.
At what point is a mortgage rate considered good?
Whenever the Federal Reserve lowers its short-term interest rates, most people expect the same to happen to mortgage rates.
That’s not the case always. Stop putting too much emphasis on the low mortgage rates that you see being advertised. The truth is that mortgage refinance rates are volatile – meaning they can change at any moment.
You should also bear in mind that your mortgage rate is basically determined by your credit score as well as your home equity. As long as you have a stable source of income and a good credit score – you can be almost assured of a competitive mortgage rate.
Other things to consider when you want to refinance
Mortgage brokers
You should consider working with mortgage brokers if you want to fasten the process or repayment. A mortgage broker will help in evading a lot of bureaucratic processes often witnessed in banks. All you will have to do is identify a reliable and experienced mortgage broker to work with. They are often able to move faster than lending institutions to lock in a rate, and will be able to tell you if it is a good time for you to refinance.
Stricter qualifications
It is also important to note that qualifying requirements can currently be more strict than usual. Besides, services such as house inspection may be affected because of the coronavirus restrictions.
Is it a good idea to refinance a half percent?
You have probably heard several times people saying that if mortgage rates are lower than the existing rate by one percent or more, then it is appropriate to refinance. Nonetheless, even a half-point reduction in your mortgage rate can make a lot of difference.
To be able to know how much you are able to save, you can make use of the mortgage refinance calculator. Try adding the costs of refinancing such as origination fees, appraisal charges and closing costs to determine your potential savings.
Other factors to consider in mortgage refinancing
How old is your existing loan?
If it has taken you quite a while to repay your current loan, then it means it will take you even longer time to settle your debts if you decide to take a refinance loan. It is therefore important to consider the principle amount you are supposed to clear before opting for a mortgage refinance.
What will you use the monthly savings for?
The best way to reach a break-even point earlier is by using the money saved from refinancing in repaying the loan. The other option is deciding to repay high-interest loans or any other personal debts you may have.
In general, there are several factors that you should consider when deciding when to refinance a mortgage. Some of these factors include how long you plan on staying in your home, the age of your existing loan, your credit status among other factors.
