5 Things To Consider When Refinancing
After securing a loan and purchasing a home, it’s time to kick back and forget about the mortgage process, right? Well, not necessarily! A savvy homeowner should always look for opportunities to refinance.
Refinancing means replacing your current mortgage loan with a new one. Homeowners may refinance for different reasons according to life circumstances and needs. These reasons may include lowering your monthly payment, shortening the term to pay off the loan, borrowing cash on your mortgage to pay off credit cards, financing home improvements, or paying for a large purchase, like college, a wedding, or a new car. Major life changes, like a death or divorce, are also reasons to consider refinancing.
During the COVID-19 pandemic, our economy experienced record-low rates, resulting in a huge increase in homeowner refinancing. According to data from one of the biggest buyers of U.S. home mortgages, Freddie Mac, 30-year mortgage rates averaged 3.72%, in January 2020. Union Savings Bank (USB) is known for our low closing costs and our competitive rates.
As our economy begins to return to normal, rates remain lower than pre-pandemic days, but are beginning to rise. Economic activity like higher inflation rates and increased consumer spending are typically indications of rising rates.
So how do you know if refinancing makes sense for you?
The first step is to reach out to your USB loan officer or go online to provide a loan officer with information about your situation and get a quote. A USB loan officer can look at your current situation and offer advice that is tailored to you. Below is what you can expect to discuss with your USB mortgage expert:
- Home Equity: How much you owe on your loan compared to how much your home is currently worth equals your home equity. A USB loan officer will use online tools and possibly an appraisal to determine the value of your home.
- Credit Score: 740 and up is considered A+, but don’t be discouraged if your score is less than that. At USB, we have programs available, and your USB loan officer will offer advice to help improve your credit.
- Debt-to-Income Ratio: The rule of thumb for lenders is a housing payment that is no more than 28% of your gross monthly income.
- Refinancing Costs: USB is known for our low closing costs. The lower the closing costs, the quicker you recoup your investment. Other lenders can charge up to 3% to 5% of your loan amount in costs. We’ll help find a solution that meets your refinancing goals and will not cost you an arm and leg.
- Staying or Moving: How long do you plan on being in the home? This will help determine if refinancing is right for you, and your USB loan officer can show you how much you would save during that time. If moving is in your near future, we can help you with a prequalification for your next home as well. Ask us about our “blanket” loan.
When done right, refinancing a mortgage loan can be one of the best investments you can make. Let one of our USB lenders help you navigate the process. We’ll work with you to calculate the numbers and answer your questions to ensure that you make the right decision for you, your family, and your financial future.