Have you thought about refinancing? You may want to, as mortgages rates have continued to reach historic lows.
Refinancing means paying off your existing mortgage and replacing it with a new one – potentially with a substantially reduced rate. You may notice current mortgage rates are incredibly low compared to those who have existing home loans.
What are the current refinance rates?
According to Bankrate, the average 30-year fixed-refinance rate is 3.54 percent, down 14 basis points over the last week. A month ago, the average rate on a 30-year fixed refinance was higher, at 3.62 percent. While the average rate for a 15-year fixed refinance is 2.91 percent, down 6 basis points since the same time last week.
Compared to the interest rate you are paying now on your mortgage; a new loan could land you a lower rate. There are tax implications and closing costs to take into consideration when looking into refinancing. However, depending on your current rate and age of existing mortgage, lower interest rates mean lower monthly payments and paying less in interest over the lifetime of the loan.
Should I refinance now?
When you pay lower interests for your housing loan, you save money. Although the lower interest rates are compelling, there are other reasons to think about refinancing, including:
An improved credit score
The lower your credit score, the more expensive your loan becomes in terms of the interest rate. Your credit score doesn’t only affect your interest rates, it also sets the bar on how much you can borrow. If your income has improved, or if you have paid off many of your debts since you took your current loan, you stand to get a better deal on your interest rate.
There are times when you may need to tap into your home’s equity to pay off school fees, credit card debt, or remodeling costs. Refinancing enables homeowners to take cash out and use that money to pay off existing debts. Mortgage rates typically have lower interest rates, saving you money over time.
Shorter time loans
While you may benefit by decreasing your interest rate on your home loan, you may be able to benefit even more when your loan duration is reduced. You can convert to a shorter mortgage duration such as a 15-year and pay off your mortgage sooner.
Converting from adjustable to fixed-rate
Adjustable-rate mortgages often have initial lower rates. However, they are subject to periodic adjustments when rates go up. Switching to a fixed-rate mortgage safeguards you from the effect of future interest hikes.
Refinancing your mortgage could increase your monthly cash flow and provide savings over the life of the loan. Speak with a licensed Home Loan Advisor today to find out how much you could be saving.