It’s been all over the news: mortgage interest rates are falling to record low numbers. Usually when this happens, the first thing that pops into a homeowner’s mind is: how can this benefit me? With low interest rates comes a boom in home buying. But what does that mean if you already own your home? In a word: refinancing. Is now the right time?
Last month’s Primary Mortgage Market Survey revealed a 30-year fixed interest rate that has dropped to 3.55%. This is the lowest it’s been in three years. Generally, refinancing your mortgage can be considered “worth it’ if your current interest rate is twenty basis points or more than the current rate. For example, using 3.55%, you might consider a refinance if your current rate is higher than 3.75%.
The thing about interest rates is that they can be volatile. While they may be down one day, the upswing can happen rather quickly. So if you’re planning a refinance and feel comfortable with the current rate, it may be time to pull the trigger. Waiting for it to fall further can backfire. The opportunity to lower your monthly payment or access equity is definitely one to explore.
How can this be done?
Your first step will be to contact your lender. They will look at your current credit score, your loan-to-value ratio, and level with you on whether a refi makes sense. A conversation with your lender should provide a lot of helpful information. Generally, if your situation allows you lower your interest rate, lower your monthly payment, shorten the loan term, and have the ability to pay off the refinance in two years or less, all signs point to yes.
Check out this info from Realtor.com to determine whether a refinance is really right for you.