With mortgage rates at a three-year low, now could be a good time to refinance. The high occurrence of refinances is due directly to the low interest rates on mortgages across the country and more importantly in local markets. More than 11,000,000 homeowners nationwide stand to save an average of $268 per month if they were to refinance today. Below are the main things to consider before making the decision to refinance:
- How long do you plan on staying in your home? You want to be able to keep your loan long enough to ensure the monthly savings will exceed the closing costs.
- How much will you save? The rule of thumb is that your new interest rates needs to be 50-100 basis points (.5%-1%) lower than your current one.
- Are you paying mortgage insurance? Refinancing with 20% equity or more will give you the best deal because you avoid paying mortgage insurance.
- Is your financial house in order? Make sure you have your financials in order. One out of four refinance applications are denied because of high debt-to-income ratios or poor credit.
Depending on your personal answers to these four questions, a refinance may be the perfect move for you to be able to save some money.
