There is a lot of discussion around interest rates. They're currently near historic lows, so there's a lot of excitement in the market. At roughly 4% for a 30-year mortgage, current rates (2017) are a bargain by historical standards. So, homeowners who are paying upwards of 6% in interest may be missing out on hundreds of dollars in monthly savings.
Use this quick mortgage refinancing guide to learn reasons to refinance and what's involved.
The answer to this question will differ for everyone. Maybe you'd like to access cash, consolidate debt, or even eliminate private mortgage insurance. All are incredible benefits, but not all may make sense for you. So, we suggest you do your research and be upfront with your chosen lender to be sure you're making the right decision when refinancing your mortgage.
A general rule is that refinancing becomes worth your while if the current interest rate on your mortgage is at least two percentage points higher than the prevailing market rate. You also want to consider how long you plan to stay in the house. Most sources say that it takes at least three years to realize fully the savings from a lower interest rate, given the costs of the refinancing. An easy way to figure that out, though, is to determine your breakeven point.
You can also run your numbers through our refinance calculator to see what your savings may be.
Refinancing may make sense for homeowners who:
There are three refinance categories to consider: rate-and-term, limited cash-out, and cash-out.
Borrowers who shop interest rates may see substantial differences. Depending on the lender, they could vary by more than half a percent. But there's more to refinancing your mortgage than interest rates. There are also points to consider. The more points you pay, the lower your interest rate. Let's not forget about costs and fees. Sometimes you can find a better deal from a lender who does not have the lowest advertised rate. So, be sure to take costs, rates, and points into equal consideration before choosing a lender.
Costs to refinance vary based on your lender, and they can add up quickly. Here are a few examples of refinancing expenses:
Overall, a homeowner should plan on paying an average of 3% to 6% of the outstanding principal in refinancing costs, plus any prepayment penalties and the costs of paying off any second mortgages that may exist. But, don't forget your lender is on your side — they want to help you make an informed decision on the solution that best fits your financial needs.
Expect to provide paperwork and to answer questions. The more prepared you are, the easier it is to get you closed — fast. Here's how we do it at American Financing:
Apply in person, over the phone, or pre-qualify online in as little as 10 minutes. With your approval, we'll begin income verification and a credit check. After reviewing loan options, we'll present a mortgage program that makes sense for you.
From there, we'll collect your financial documents, which you can share via our secure online portal.
Expect to share:
Depending on your loan program and type of refinance, you may need an appraisal. Otherwise, once conditions are satisfied, we'll prepare documents for signing so we can get your loan closed!
Interested in refinancing your mortgage? Your next step should be a 10-minute call to an American Financing salary-based mortgage consultant. There are never any upfront fees to consider. Plus, we have access to every loan in the industry, so you can feel confident your refinance needs are being met quickly and are in line with your budget. Call (800) 910-4055, or schedule an appointment online so we can have a salary-based mortgage consultant call you!