Is Now a Good Time to Refinance?

Many homeowners are currently taking advantage of extremely low interest rates right now. Below are a few guidelines to help you consider if refinancing is a good idea for you.

Reasons you may want to refinance

  • Lower your interest rate
    Typically if rates are 2% lower than your current rate you may want to consider a refinance.
  • Change the length of your mortgage
    Either to obtain a lower monthly payment (lengthen the term) or pay off the loan quicker and pay less interest (shorten the term but raise monthly payment)
  • Switch from an ARM (adjustable-rate mortgage) to a fixed-rate
    Interest rates are extremely low right now. If you plan to stay in your house for more than a few years, it might be wise to consider switching to a fixed-rate mortgage.

Reasons you may not want to refinance

  • You plan to move in the next few years
    When you refinance your mortgage you are taking a new loan out on your home and paying off the old one. The monthly cost savings gained from a lower payment may not exceed the cost of refinancing.
  • Your property value has gone down
    Your new loan at 80% of the value will not be enough to payoff the existing one.
  • You have been paying your loan off for a long time
    If you are nearing the end of your loan term, most of your payment is going towards your principal at this point and helping you build equity. Refinancing will start this process over.
  • Your current mortgage has a prepayment penalty
    A prepayment penalty is a fee that you may be charged if you pay your loan off early. A prepayment penalty will lengthen the amount of time it takes for you to realize the savings of refinancing.

Disclaimer: The above information contains general guidelines that may or may not apply to your individual situation. Only you and your mortgage professional can determine whether or not a refinance is ultimately in your best interest. If you would like a reference for a qualified mortgage professional in Northern Colorado, feel free to contact me.