May 15, 2015
Whether you’re trying for a lower mortgage rate or looking to consolidate debt, refinancing your home loan is a great option for any homeowner. How does it all work? Here are a few answers to frequently asked questions about refinancing.
Why should I refinance my home loan?
If you choose to refinance, you will pay off an old loan on your home and take out a new one at a lower mortgage interest rate. To be eligible for refinancing, you will need to have equity in your home, a stable credit rating, and steady income. You can borrow a percentage of the equity to pay for remodeling costs, consolidation, and college tuition.
It’s important to know that refinancing your home loan does have some strings attached. With a refinance, you will incur all the closing costs that come with getting a new mortgage. Therefore, unless you plan to do extensive renovation and can secure an interest rate at least two points below your current rate, you may want to consider another financing option.
When should I refinance?
Many homeowners try to refinance while mortgage interest rates are low, especially if the rates are at least two percentage points below their existing loans. When you refinance also depends on how long you plan to own your home, how far along you are in paying off your current loan, and whether you will have to pay considerable fees to refinance.
If you are planning on selling your home soon, you will probably not recoup the costs you incurred to refinance. If you are at least halfway through paying your current loan, you will likely gain very little by refinancing. However, if you plan on owning your home for at least another five years, that will probably be a long enough period of time to recoup any refinancing costs and see real savings as a result of lowering your payments.
In fact, if it doesn’t cost you anything to refinance, you can gain even more. Many lenders will let you roll the costs of the refinancing into the new note and still reduce the amount of the monthly payment. Additionally, there are no-cost refinancing options available.
Can I refinance more than once?
During the most recent refinancing boom, many homeowners refinanced their home loans up to three times within short periods of time due to downward-trending interest rates; this made it very attractive to trade in one loan for another. It’s important to remember, however, that each time you refinance it is like applying for a mortgage all over again: you’ll have to go through the application process, get a home appraisal, and incur closing costs. You may have to pay a penalty if you have a pre-payment penalty clause in your present mortgage and choose to refinance.
Contact an experienced local lender before you choose to refinance your home. For more information, you can reach out to our knowledgeable real estate agents at Hilton Head Island Real Estate Brokers. Just call 843-785-8006 or fill out our easy contact form here.
If you want to make a little piece of The Island your own, you need more than just a road map and a REALTOR. You need a partner who can make things happen.
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