Should I Refinance My Home?

Whether or not to refinance your current mortgage is an important decision to consider while owning your home.

The goal of refinancing should be to reduce your monthly mortgage expense (lower monthly payment) and reduce overall interest paid on your mortgage loan. Refinancing is not recommended for cashing out the equity in your home to pay bills or short-lived assets. This could put you upside-down on your mortgage in a declining market and/or erase necessary funds required to sell your home and pay off the mortgage balance at a later time.

Whether or not to refinance your home depends on several factors:

1) Is your home mortgage balance less than or equal to the value of your home? Lenders will not loan more than the value of your home.

2) Does your refinance require an appraisal? If so, it will need to appraise for a value equal to or more than your current outstanding mortgage balance.

3) Can you recoup the cost of refinancing within two years? or Is the refinance interest rate 2 or more points lower than your current interest rate? Tip: Try to find a mortgage loan refi that requires no closing costs.

4) What are your credit scores? If your credit scores are in good shape (720 and above) you'll get the best rates. If your credit scores have improved significantly since you established your current mortgage, you may qualify for a lower mortgage insurance rate (PMI), further lowering your monthly mortgage payment (if you have less than 20% equity in your home).

5) Are you planning to move within 2 years? Plan on staying in your home at least 2 years if you want to refinance otherwise refinancing is not recommended.

6) Does your current mortgage or mortgages have any pre-payment penalties? An important factor to consider if you're considering refinancing.

For more information contact your loan officer or consult with your real estate agent.