5 Signs You’re Ready to Refinance
Refinancing isn’t always a smart option for every homeowner. The fees and closing costs need to be weighed against the potential savings to determine whether or not a refinance is worth it in your situation. Furthermore, your lifestyle and overall budget should be considered before taking on a refinance.
To give you an idea of whether or not you’re ready to refinance, take a look at these 5 tell-tale signs:
- Your interest rate is significantly higher than the rate currently offered by your lender.
Mortgage rates fluctuate frequently, and they’ve certainly dropped to historic lows over the last few years. If you took out a mortgage during the peak of the housing boom, you are likely paying at least one or two full percentage points more than you would if you were to take out the same loan today. Talk to your lender about current mortgage rates and see if you would qualify for the lower rate being offered today.
- Your home has increased in value.
If you’re home experienced a decent boost in value, you may have more equity in your home than you realize. Many homeowners don’t do a great job of keeping up with their home’s current market value unless they are actively trying to sell it. Figure out your home’s true value in today’s market. If it’s considerably more than when you took out your mortgage, that built up equity can help you qualify for a refinance.
- You have an adjustable rate mortgage – and rates are trending higher.
Adjustable rate mortgages (ARM loans) can be great for homeowners who want to save money on their monthly payments. However, when interest rates begin to inch upward, homeowners can find themselves paying more down the road. That’s because most ARM loans start out with an introductory fixed rate period (usually 3, 5 or 7 years) and then the interest rate adjusts at a set interval after that period is over. If rates are trending higher, the adjustment will likely increase the mortgage rate. To avoid these increases each year, refinancing to a fixed rate mortgage product could be a wise decision.
- You need cash.
Instead of going through a payday advance service or taking out a costly personal loan, many homeowner choose to tap into their home’s equity to access cash they need. This is known as a cash-out refinance. In this type of loan, the homeowner refinances the mortgage for more than what they owe and gets to pocket the difference. While this sounds very simple, there are certain rules and qualifying requirements that must be met. Discuss this option with your lender to see if it makes sense for your situation.
- You need to get out of debt.
Speaking of cash-out refis, many homeowners are choosing to go that route simply to clear out their other debts. The cash received at closing can be used to pay off high interest credit card debt, student loans, medical bills, car loans – you name it. Because so many Americans are burdened by debt, this refinancing option saw some pretty steady growth in popularity, especially during the housing bubble.
Again – cash-out refis aren’t always the best option for everyone. Contact the refinancing experts at eLEND for a no obligation consultation and free rate quote. Call 1-800-634-8616 today!
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