Is Now a Good Time to Refinance?


With interest rates hitting all-time lows over the past few weeks, many homeowners are opting to refinance. To decide if refinancing your home is the best option for you and your family, start by asking yourself these questions:


Why do you want to refinance?


There are many reasons to refinance, but here are three of the most common ones:


1. Lower Your Interest Rate and Payment: This is the most popular reason. Is your current interest rate higher than what’s available today? If so, it might be worth seeing if you can take advantage of the current lower rates.


2. Shorten the Term of Your Loan: If you have a 30-year loan, it may be advantageous to change it to a 15 or 20-year loan to pay off your mortgage sooner rather than later.


3. Cash-Out Refinance: You might have enough equity to cash out and invest in something else, like your children’s education, a business venture, an investment property, or simply to increase your cash reserve.


Once you know why you might want to refinance, ask yourself the next question:


How much is it going to cost?

There are fees and closing costs involved in refinancing, and The Lenders Network explains:

“As an example, let’s say your mortgage has a balance of $200,000. If you were to refinance that loan into a new loan, total closing costs would run between 2%-4% of the loan amount. You can expect to pay between $4,000 to $8,000 to refinance this loan.”

They also explain that there are options for no-cost refinance loans, but be on the lookout:

“A no-cost refinance loan is when the lender pays the closing costs for the borrower. However, you should be aware that the lender makes up this money from other aspects of the mortgage. Usually charging a slightly higher interest rate so they can make the money back.”

Keep in mind that, given the current market conditions and how favorable they are for refinancing, it can take a little longer to execute the process today. This is because many other homeowners are going this route as well. As Todd Teta, Chief Officer at ATTOM Data Solutions notes about recent mortgage activity:

“Refinancing largely drove the trend, with more than twice as many homeowners trading in higher-interest mortgages for cheaper ones than in the same period of 2018.”

Clearly, refinancing ha