With the changing seasons upon us, you might be wondering whether it’s also time for a change to your mortgage. The busy housing market and changing interest rates have put mortgages at the forefront of many people’s minds. However, it’s easy to feel unsure whether something like a refinance is the best move for your mortgage this summer.
As always, in the mortgage world, the decision to refinance primarily depends on your situation. This means there’s not one correct answer for everybody, as each case is unique. However, there are a few questions you can ask yourself to guide you and see if you fall on the side of needing to refinance.
Can you secure a better rate?
For many homeowners, the biggest motivation for refinancing their mortgage is the possibility of getting a lower interest rate. This results in smaller payments over time and the ability to save more money. Depending on when you secured your current mortgage and your mortgage type, your interest rates may be much higher than the rates we see today. Keep in mind that fixed rates are on the rise. We’re no longer living with the rock-bottom historic low rates we experienced months back, but interest rates are still relatively low. Refinancing your mortgage this summer could still give you a lower rate and save you money.
Before you choose to refinance, it’s important to consider whether the potential difference in interest rates will be big enough to be worth refinancing. Breaking your mortgage term can result in penalties. You must be sure you’ll be saving more money than the penalty to break your term.
Can you renegotiate your terms?
Often, people also choose to refinance because they want to change something about their current mortgage terms. Since our situations are constantly changing, it’s natural to find the terms you agreed to five years ago don’t suit you as well now. These changes commonly include shortening the length of the mortgage loan, for example. People with the ability to pay off their mortgage faster may wish to avoid paying more interest over time. Other renegotiation terms can include a switch between fixed-rate and variable-rate mortgages or the ability to contribute more with each payment.
If you have any issues with your current mortgage and believe you should try to renegotiate, you might be a good candidate for a refinance this summer. You can speak to a broker, and they can help you see if your goals are achievable right now.
Do you plan to stay in your home long-term?
Mortgage refinances are best for homeowners who are sure about their long-term plans to stay in their homes. Breaking your current term to refinance is one thing, but leaving your home after a refinance means breaking your mortgage for a second time. You want to avoid this, so you don’t run up huge penalties.
If you’re confident you’re going to stay in your home for the long haul, a refinance might be a good option for you. However, if you have any doubts about your future plans, hold off.
Are you planning any renovations or upgrades?
For homeowners who plan to stay in their houses for a long time to come, some of them might be considering taking on a renovation at some point. Refinancing can be a great opportunity to access the home equity you need to complete these projects! By refinancing, you gain access to any existing equity you have in your home.
What’s your financial situation like?
Of course, one of the most important factors in determining your suitability for a refinance is your own financial situation. It’s essential to have the healthiest finances possible for yourself, so you look qualified for a refinance. Lenders will want to know you have a steady situation before they will accept your refinance application. They will want to see proof of employment, income, and credit score as well. You can read some guidance on building a solid credit score here. Lenders will consider if it’s likely you’ll lose your job or experience a dip in your income that might affect your ability for a successful refinance.
With all that in mind, look at your income and employment history before deciding a refinance is the right choice for you. If you have a good credit history, steady employment and income, and financial stability, the odds are good you’ll qualify for a refinance. This doesn’t mean it’s impossible to refinance if you don’t meet these requirements, but it will make the process trickier.
Thinking about debt consolidation?
One of the biggest reasons people choose to refinance their mortgage is to consolidate their debt. By rolling all existing debt into one loan through a refinance, this helps many homeowners manage their debts more easily. It also increases cash flow.
If you find you’re struggling with debt, a refinance might be a great option for you! You’ll have a simpler, more manageable debt that you can keep track of with ease. Remember that debt consolidation doesn’t erase your debt for you, but it can make it less intimidating.
Contact a broker
Whatever your reasons for wanting to refinance your mortgage this summer, and no matter what your financial situation is, it’s important to get in touch with a mortgage broker! Brokers are your pathway to a successful mortgage experience. They can help you understand your situation, your options and connect you with the best lenders.
If you have any questions about refinancing your mortgage, get in touch with me here!