blog-refimortgageAs many homeowners start to realize, interest is one of the biggest expenses incurred when paying down a mortgage. Because of this, many after reaching a certain point decide to refinance. When rates are low, as they’ve been as of recent, it looks like the right time, but are you making a good decision?

Refinancing proves to be beneficial in a few scenarios: Getting a better interest rate, converting an ARM to a fixed-rate mortgage, reducing your payments, or taking out a new mortgage to make another high-dollar purchase. In all, homeowners take the step after they’ve built up some equity in the property. So, consider these points:

1. What’re Your Finances Like?

Even when interest rates have dipped, you might not be in the best financial spot. Aside from having equity built up in your property, you need to approach refinancing like you’re reapplying for a mortgage: Specifically, that you need to have near-perfect credit. Otherwise, if your score’s too low or you have too much debt, you’re not going to get that great of a deal.

2. Know the Risks

No matter if you decide to do rate-and-term or cash-out refinancing, you could be penalized for paying down your existing mortgage with your home equity line of credit. Most mortgage companies will charge a fee, sometimes several thousands of dollars, when you do this.

3. Consider the Expenses

Just like applying for a mortgage, again, you’ll be expected to pay certain fees:

  • The application fee to cover credit check and loan request
  • Title insurance and title search
  • Lender’s attorney review fees
  • Points and fees for origination, preparation, and evaluation

Factor in all, and as you calculate your potentially lower monthly payment, make sure you’re still getting a deal.

4. Know What You’re Getting Into

Don’t just look at the individual monthly payments; think about, instead, what you’ll pay over the loan’s course.

If you’re planning to live in the home for the next several years, you’ll end up saving, but if you’re expecting to sell the property soon, you might as well keep the mortgage you have.

Too, make sure you’re not refinancing to an ARM. The initial rates might be appealing, but realize that your payment will increase over time.

Instead, look for a fixed-rate mortgage with a lower rate and shorter term, as you’ll get the loan paid off sooner at a smaller cost. As a result, you may end up with more money on a month-to-month basis, which could assist with purchasing another property, buying a new car, contributing to a child’s tuition, home improvements, or credit cards.

When you’re in the home-buying stage, turn to By Carrier for creating a custom home in Central Connecticut. To learn more, contact our team today.

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