With mortgage interest rates having spent most of 2020 at all-time lows, people who might have never considered refinancing suddenly found themselves racing toward the refi closing table. After all, refinancing your home mortgage at a lower interest rate ultimately means more money in your pocket. Who wouldn’t want that?
With mortgage interest rates beginning to crawl back up but still relatively low, NOW is still a great time to refinance your home. It doesn’t matter if you’re a relatively new homeowner or you’ve owned your home for 30 years, a refinance can save you a lot of money. A refi can also help you pay off your mortgage a lot quicker than you ever imagined.
Following are five important questions every homeowner should ask themselves before refinancing:
1. What is my current mortgage interest rate?
If you bought a home any time before 2010 and entered into a 30-year, fixed-rate mortgage, your mortgage interest rate is likely above 5%. If you bought a home prior to 1995, it’s quite likely that your interest rate is 8% or even much higher. With the average interest rate as of early March sitting at just over 3% for a 30-year, fixed-rate mortgage, there’s obviously a major savings to be had by refinancing. The key is not to waste time.
2. How much can I lower my mortgage interest rate with a refi?
The short answer to this question is, “A lot!” In the summer of 2020, as COVID-19 led to a sharp downturn in the U.S. economy, mortgage interest ranks sank to record lows. By the time August rolled around, the rate on a 30-year, fixed-rate mortgage plummeted below 3% for the first time ever. The trend continued through year’s end as rates dipped all the way to 2.68% by December. As of February 2021, the average rate on a 30-year, fixed mortgage was 2.81%—still much lower than the norm.
3. Am I eligible to refinance my home mortgage at this time?
No different than with a home purchase, factors such as credit score, outstanding debt and current income level can affect your eligibility for a refi. Your Fairway of the Carolinas mortgage advisor can help you navigate all of this and let you know if you’re ready to refinance. If not, there’s no reason to panic or throw in the towel.
By taking simple steps to improve credit, you can quickly boost your score. When you apply for a refi with Fairway, your loan officer will obtain and review your credit report. If your mortgage professional determines you can benefit from credit score improvement, we may refer you to work with Fairway’s internal Creditool team. If so, we’ll ask you to take part in our program. One of our highly skilled credit analysts will review your credit report and draft a credit improvement action plan for you. There is no cost to you to do so. Learn more here.
4. What types of closing costs can I expect?
Closing costs associated with a mortgage refi tend to fall at between 2% and 6% of your loan amount. While you always have the option to pay these costs upfront, many people who refinance choose to have their closing costs woven into their monthly payments. This way, a lack of readily available cash won’t stop you from refinancing when the time is right.
5. What type of loan should I choose for my refi?
It depends on your objective in refinancing. If your goal is to simply lower your monthly mortgage payments, it’s best to stick with a 30-year mortgage if that’s what you previously had. If you’re trying to pay off your home faster, consider a 15- or 20-year plan. This Mortgage Calculator will help you determine the monthly payments of your loan. Simply enter the loan amount, term and interest rate in the fields below and click calculate. Our goal at Fairway of the Carolinas is to always provide the loan that’s most suitable for your lifestyle and goals. Click here to explore some of your options.
So, what you are you waiting on? With mortgage interest rates still very low by industry standards, it’s a wonderful time to refinance. But with rates beginning to tick a bit upward, now is the time to act. Let Fairway of the Carolinas guide you through the process of refinancing your home. We guarantee it’ll be a lot quicker and easier than you might think. Contact us today or drop a question in the comments section below. We can’t wait to serve you!