My clients moved to a new home in the midst of the pandemic and obtained a low mortgage interest rate of 3.2%.
About a year later, they found themselves refinancing their already low interest rate to an even lower one, saving them hundreds of dollars per month AND thousands over the course of the loan.
If you don't know what your interest rate is take a look at your mortgage statement. If your interest rate is currently 0.5% – 1.0% higher than the current interest rates, I highly recommend connecting with a Mortgage Advisor to consider refinancing. You should never pay more for the price of money than necessary when it comes to a loan.
Here's what financial lending expert and mortgage advisor Logan Brean of Antioch-based Finance of America had to say on the topic.
Let’s start with the basics. Why should a homeowner care about what their current interest rate is if they’re able to make their monthly payments?
At its very core, an interest rate is the price of money. The higher the interest rate, the more you’re paying on that money. In the case of a homeowner, it’s how much you’re paying on that money to secure your home. Even a fraction of a percentage lower than what you’re paying can save you thousands of dollars in interest over the lifetime of a loan. That extra money should be going towards retirement or something else – not in a banks pocket.
What is refinancing and why would a homeowner want to consider it?
It’s taking your existing mortgage and obtaining a new one, usually with better terms and balance. When you refinance, generally it’s for the better – lower interest rate, lower monthly payments, perhaps a shorter loan term to save money over the life of the loan. For some, it could also mean getting rid of their PMI, paying off debt – there’s a lot of different refinancing options available.
What is the first step in the refinancing process?
My advice is to look at what you’re paying currently in interest, and do a quick internet search of today’s rates. You can reach out to me directly and I can help you find that information – and more than likely provide you with a better rate than what you’re seeing on the internet.
What can I expect as I go through the refinancing process?
You’ll need to provide certain documentation, mostly done digitally, and then it goes through the underwriting process for approval. Once approved, you’ll have to sign paperwork where a notary generally meets you at a preferred location (like your home), where you’ll sign the paperwork. Once that’s complete, next step is to wait to for your new mortgage payment.
How do I know if it makes sense for me to refinance?
If you’re current interest rate is a half percent or greater than the current interest rates and you plan to stay in the property for at least two more years, you should consider looking into what your options are. If you’re able to lower your interest rate where you can save monthly and over the long-term, it’s definitely worth taking a look at.
Can my credit score impact my refinance rate?
Yes, your credit score will impact the refinance rate. That’s why it’s important to work with a trusted lender who can provide insight and give you tips to improve your credit score in order to get a better rate.
What’s the going refinance rate right now for a 30-year loan?
It’s all a case by case scenario. With great credit, you could potentially be looking below3% for a 30-year or maybe even closer to 2% for a 15 year.
What should I look out for in the process?
Always check the closing costs. Mortgage refinancing costs can range anywhere between 2% and 6% of the loan – be aware of all charges. You’ll receive a closing estimate that will show you everything in detail – question anything that looks off.
Can I finance the closing costs?
Yes, many of my clients chose to roll their closing costs into their loan to eliminate out of pocket costs.
Please feel free to reach out to discuss your home buying journey and what makes the most sense for your situation.
In Good Health,
Daniel