Should You Refinance Your Home?
When you sign on the dotted line to take out a mortgage, you probably expect to have those specific terms until the home loan is completely paid off. However, it’s possible to replace your current home loan with a completely different one. The new mortgage will pay off the old one. This is known as refinancing. There are a number of reasons why it may be advantageous for some homeowners to refinance their homes.
Refinance your home if interest rates fall.
One of the most common reasons for refinancing a fixed-rate mortgage is if interest rates fall below the rate on the home loan. Usually, these refinanced mortgages will retain the same term, or the number of months left on the life of the loan. Refinancing to take advantage of lower interest rates can mean significant savings over the life of the mortgage. However, it might only be worth the effort if interest rates have fallen at least 1% to 2% beneath the fixed rate. Before refinancing your home under this circumstances, you should also consider the length of the remaining term and the total amount left on the loan to determine whether it’s worth the effort and expense to refinance.
Refinance your home if interest rates are going up.
In some cases, it may make sense to refinance if interest rates are on their way up. If you have an adjustable-rate mortgage (ARM), rising interest rates will mean higher payments, and this is never ideal. In this case, homeowners should consider switching from an ARM to a fixed-rate mortgage.
Refinance your home if your credit score improves.
It’s possible to buy a home with poor credit, but you’ll have a high interest rate. If your credit score has improved significantly since you first took out the mortgage, it may be worth it to refinance.
In Steamboat Springs, CO, the State Farm Insurance - Debbie Aragon Insurance company is known for delivering excellent insurance products. However, this office also provides financial guidance on matters like mortgages and home loan refinancing. To request a consultation for financial guidance, you can call their office at (970) 879-1756.