Refinancing? Here’s What You Need to Know

Homeowners who have decided to refinance this year have made a wise decision because mortgage interest rates are currently still extremely low. Whether you have already decided to refinance or you are in the process of making sure that it is a good choice for you, there are certain things you need to be aware of in order to make the best decision.

Refinancing can be a great option for homeowners like you, but for some, it may not the best time to do so. Factors that can dictate this are your credit score, the costs, and many more. Here are some things that you need to consider when making the decision to refinance:

Break-even point

Will you get ahead or break even by refinancing? If yes, then you refinancing will be a great option for you. You can calculate your break-even point by dividing the costs of the refinance by the monthly savings of the new home loan. The answer you get is the number of months it will take to gain back the costs of refinancing. A two or three year period is the usual amount of time.

Costs

While refinancing can potentially save you money, it is a long process that requires you to pay multiple costs. You will be paying many fees associated with refinancing, from application fees to loan processing fees and more. You want to be completely prepared to spend some money upfront in order to get the process going.

Credit score

Since your credit score is a huge factor in the mortgage rates that you can qualify for, it makes sense to know your credit score before you begin refinancing. Your score should be above average or high, and it will affect the rates you are offered.

Staying in your home

When you refinance, you need to remain in your home at least until you break even. For this reason, if you are planning on moving before then, refinancing will not be a good option for you.

Refinancing a mortgage loan can be a long and costly process, but if you are prepared upfront, you can budget accordingly and get the best refinancing results!