Is It Still Worth it to Refinance My Mortgage?
Refinance rates are hovering below 3% for qualified borrowers, so if you haven’t refinanced a mortgage in the past six months, now is the time to take action. I’ve been getting emails from clients asking if it’s still a smart time to refinance. Yes! Keep reading to learn which mortgage refinance loans might be the best option.
How long will mortgage rates stay low?
It’s fair to say that mortgage rates are difficult to predict in the face of economic uncertainty, and now more than ever. Late spring showed signs of economic recovery with businesses opening up and unemployment shifting down. Mortgage rates began to rise, remote work hit a long-term stride, and now school is back in session.
But the Delta variant has shifted expectations, causing a new wave of uncertainty. Mortgage rates have dropped again, and it’s difficult to predict how the market will respond in the weeks to come. If you have a mortgage rate above 4.5%, consider refinancing your mortgage.
Which home loan is best to refinance my mortgage?
Homeowners ready to refinance and take advantage of low mortgage rates have several home loan options.
Do you have good credit and substantial equity in your home? Consider a cash-out refinance or start renovations on your primary residence. For homeowners without much home equity, consider a rate and term refinance or an FHA streamline refinance to reduce your monthly mortgage payment.
Top Mortgage Refinance Options
Cash-out Refinance
Take advantage of your equity by accessing the cash sitting in your home. With a cash-out refinance, you can use the cash without limitations. Take a much-needed vacation, invest in another property, or pay off high-interest debt. Typically, you can apply for a cash-out mortgage refinance up to 80% of your home’s value.
Renovations & Remodels
Refinance your current mortgage into a renovation home loan and start that big remodel you’ve been dreaming about. Ask about the FHA 203(k) or the Fannie Mae Homestyle loan, both designed for home renovations. We can guide you through the process to secure the best option.
Rate and Term Refinance
A rate and term refinance can lower your monthly payment and get you a better mortgage rate without taking cash out. Refinance an adjustable-rate mortgage to a fixed-rate mortgage. Or refinance a 30-year fixed rate to a 20-year fixed rate to pay off your mortgage faster.
FHA Streamline Refinance
FHA loans often qualify for a streamline refinance when your mortgage rate is above current market rates. It’s a fast process with limited paperwork and flexible requirements.
Mortgage Consolidation
Refinance first and second mortgages into one mortgage with a lower payment and a fixed term. If you carry a second mortgage, a home equity loan, or even a home equity line of credit, look into consolidating your loans into one mortgage at a lower rate. We can help you determine which path will save you the most money on your mortgage.
Do I need an appraisal to refinance my mortgage?
In most cases, yes. Refinancing a mortgage is tied to your loan-to-value ratio (LTV). This means that the final value of your home will impact your mortgage. Home appraisals are still a requirement by most mortgage lenders to determine the fair market value of your home. Once the fair market value of your home is established, then the value is submitted to the mortgage lender along with your mortgage application.
The maximum loan amount for a mortgage is typically 80% of your home’s value but can go up to 100% for some government-backed loan programs. If the value of your home has jumped since your initial purchase or last refinance, home appraisers will evaluate comparable recent sales within the neighborhood to determine the current value.
What about closing costs?
Refinancing can save you money on your mortgage, but it can also end up costing you money in the long run if you’re not careful. Take some time to figure out how long it will take to “break even” on your new mortgage. Will your monthly payment decrease? Are you switching from a 5-year adjustable to a 30-year fixed? Are you rolling your first and second mortgage into one?
Discuss your financial details with a qualified mortgage broker. Remember to consider loan origination fees, closing costs, and payoff goals.
What’s Next
Our clients are often surprised to learn how much they can save by refinancing. We can help you figure out the best way to save money based on your financial goals and your lifestyle. No matter which loan is best, you can take advantage of low mortgage rates by refinancing today. We partner with mortgage lenders in California, Oregon, Washington, and Colorado, and we can help you get the right mortgage. Give us a call to get started.
