It’s Not Too Late to Refinance
November 13, 2020
Mortgage rates have been falling steadily since the onset of COVID-19 and the lockdown. This has led to an increase in home purchases and refinancing. If you’ve been sitting on the idea, but haven’t acted yet, it’s not too late to refinance your mortgage! Your mortgage is probably one of your biggest financial burdens, so if there’s an opportunity to reduce that monthly cost, now is a great time to consider refinancing.
If you’re wondering what the benefits of refinancing are, check out our blog, 6 Reasons to Refinance. A recent Black Knight study found that 19.3 million homeowners could lower their current mortgage by 0.75% by refinancing. That’s extra money in your pocket each month!
Here’s a brief overview of some of the benefits of refinancing:
- Lower mortgage rate - reducing your monthly mortgage payments (and saving you thousands!)
- Moving from an adjustable rate to a fixed rate
- Eliminating PMI, or private mortgage insurance
- Shortening the term of your mortgage so you can pay it off sooner
Why people have been waiting
Homeowners may be holding off on refinancing for a few reasons. If someone refinanced a few years ago, they may think that they’re in a good place with an acceptable rate and don’t feel the need to refinance again. Remember that refinancing includes a new set of closing costs, so if you did refinance in the last few years, crunch some numbers to see if the monthly savings is significant enough to offset the new fees. Give us a call to discuss your options.
Other people may be waiting because they’re trying to time the mortgage market. Much like the stock market, as rates and prices fluctuate, it can be tempting to hold out for the best price if things continue to trend a certain direction. But, just like the stock market, mortgages can fluctuate due to many factors like the election, global health, etc. Instead of trying to perfectly time your refinance, focus on your unique situation and needs and decide if a refinance will improve your current rate and take action.
Here are some other things to consider if you want to refinance.
1. How long do you plan on being in your current home?
If your projected stay at your home is relatively short, the savings may not recoup the added closing costs. A general rule of thumb is a savings of 0.5% or more is enough to break even and then some. Do some projections and see if you break even on your closing costs in four years or the amount of time you expect to stay in your home, whichever is less.
2. Check your credit score
This time has been tough on everyone, and if you’ve taken a financial hit, your credit score may have lowered. Check your credit score and evaluate if you should take a little more time before you apply to refinance. Borrowers with good credit will get better rates, but don’t get too hung up on trying to have a perfect credit score and miss the window of opportunity.
3. What does 2021 look like for you?
We know that’s a loaded question, considering 2020, but consider your financial situation for the foreseeable future. Is your job outlook stable? Refinances can sometimes take months to process, especially now with an influx of refis and the logistics of COVID.
If you’re considering refinancing your home, don’t wait to get in touch with us and let us help you explore your options. It’s definitely not too late to take advantage of the low rates available right now, and with the holidays coming, it’s a good time to start thinking about saving more each month.