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As mortgage rates decline to the lowest levels in a generation, homeowners are flocking to trade in their high-rate mortgage for a lower-rate loan. It can be a smart move – if you take the time to examine all the facts before you sign the new loan documents. Why Refinance? Save money. This is the main reason most people refinance. A lower interest rate often translates to lower monthly payments, lowers the total cost of the loan and increases the rate at which you build equity in your home. Be sure to do the math first. Closing costs can eat into those savings, especially if you plan to move in just a few years. Credit unions typically offering lower closing costs than other financial institutions, sometimes drastically lower. CDC FCU can also help you to do the math in figuring out how much you will actually save with a refinance. Shorten the loan. With interest rates declining, you may choose to refinance for a shorter term and still pay almost the same amount monthly. You’ll also build equity faster and could drastically reduce your overall interest payments. Convert to a Fixed-Rate. In the current uncertain economy, many homeowners are looking for stability. By converting from an adjustable rate to a fixed rate, you’ll have the peace of mind knowing that your payment amount will never change. However, if you’re planning on moving in a year or two, it may pay to keep the adjustable rate. Take out Cash. You can wipe out credit card balances and other debt by obtaining a larger mortgage if you have enough equity in your home, and using the excess cash to pay off those high-rate debts. You’ll then have one monthly payment. This is a great way to lower your debt costs for those who are disciplined about their finances and do not run up credit card and other debt again. Are you Eligible? To qualify for a refinance, homeowners should meet certain conditions: Home Value. Generally, you must have at least 20% equity in your home in order to qualify. But as home values continue to decline, so does the homeowner’s equity. Keep that in mind when deciding on when to refinance. If home values in your area are falling, it may be wise to refinance sooner rather than later. Credit Score. In today’s economic climate, only those with very good credit scores will qualify for a refinance. Before starting the process, review your credit record (go to www.annualcreditreport.com for details) and purchase your credit score. If you can spot any errors or other problems, deal with them before applying for your new mortgage. A Conforming Loan. The lowest rates are only available on home loans of $417,000 or less, known as conforming loans. Mortgages $625,000 or higher, known as jumbo loans, are still commanding significantly higher rates. Ready to Start Saving? Refinancing your mortgage can save you a significant amount. If you’re ready to get started, apply here or our mortgage loan officer, Susan Stromquist, is available to help. She can be reached directly at 678-553-5379. View current mortgage rates. Back to Top |
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