Is it time to refinance?
5 questions to ask yourself.5 questions to ask yourself.
Before you decide to refinance your home mortgage, consider your answers to these important questions:
- Is your current rate lower than market rates?
Generally, you want about a 1 percentage point difference between what you have now and what is available. This can be enough to allow for savings over a few years.
- Do you have an adjustable-rate mortgage that is due to adjust?
You may find yourself staring at the prospect that your mortgage payments could go up. In this case, it may be a good time to switch to a fixed-rate mortgage to give yourself some peace of mind by having a steady interest rate and monthly payment. Or, you may decide to refinance into another adjustable-rate mortgage with better terms.
- Will the savings outweigh the costs?
There are additional costs associated with refinancing, including closing costs paid to the lender to process your loan. While you may be able to get these costs absorbed in your loan, it may raise your monthly mortgage payment, making the refinance not worth it. Remember to add up all the costs of refinancing to help you decide what's right for you
- How long do you plan on staying in your home?
If you're thinking of moving soon, then it's possibly not worth the expense of refinancing. Check with a mortgage specialist to discuss.
- How many years are you into your existing loan?
When you refinance, you enter into a new loan and start over. In some cases, you may choose to shorten your term in order to reduce your total interest expense. If you reset to a longer term, while it may sound good to lower your interest rate and your monthly payment, it may not be the best move if you have been in your loan for a long period of time.
How long will it take to break even on a mortgage refinance? That depends on a multitude of factors including your current interest rate, the new potential rate, closing costs and how long you plan to stay in your home. Speak with a mortgage specialist to sort through the confusion and determine if refinancing your mortgage is a sound financial decision.
Not all applicants will qualify for financing. Mortgage rates and terms are subject to change without notice. Equal Housing Lender. All loans are offered by CIT Bank, N.A.