As most of us here in Ohio are dealing with social distancing, furloughs and economic unease, there are a few silver linings. One of these is interest rates.
With the Federal Reserve’s recent rate cuts, the mortgage industry has responded like everything else: ups and downs. But the reality is that rates right now are historically low when compared to this time last year.
Can You Qualify?
For those who have maintained stable employment throughout this time and have the ability to get approved, now may just be the best time to consider a refinance. Many others have seen the same opportunity which is why the mortgage industry has been flooded with refinance applications. The sheer number of new applications has led to some surge pricing for certain loans but it’s still worth a look.
Things You Should Consider
Refinancing is basically taking out a new mortgage. And this is always a step that should be thoroughly considered, especially in times of great volatility. Here are some important things to consider before you apply for mortgage refinancing.
Many homeowners are considering the money-saving aspect of a lower rate. In general, the rule of thumb is that if your current rate is a full point above the new rate, it makes sense. But even a half a point will prove to be a savings over the life of your loan.
You want to consider that you will have costs associated with the mortgage refinance. You’ll want to calculate at what point you will break even with recovering these costs.
Lengthening the Term
Starting over means starting over. So if you are currently into ten years of your current 30-year loan, you will be setting that back to square one.
Considering that the amortization of a mortgage has you paying more interest at the forefront of the loan and reduces as you get further into it, will you be paying more interest over the life of the new loan even at a lower rate? That’s worth taking a look at.
Tapping Equity For Cash
If your home has appreciated since you first took your mortgage, you may want to get access to that equity right now. You can do that by means of a cash-out refinance or applying for a home equity line of credit.
Getting Rid of Your PMI
If your current mortgage was over 80 percent loan to value, you were probably subject to Private Mortgage Insurance (PMI). If you have built up enough equity in your home, you may be able to reduce your monthly payment by eliminating the need for the PMI payment.
Switch From an ARM to a Fixed-Rate Mortgage
Your current ARM mortgage may be subject to rate increases over the term of your loan period. Getting a fixed-rate mortgage will help lock in a low rate, especially if you are looking to stay in your home long-term. Conversely, if you aren’t planning on staying where you are very long, the very low rates of an ARM right now may make sense in the short-term. It’s all up to your individual goals and needs.
About Liberty Capital Services
If you have questions concerning mortgage refinancing, call the mortgage professionals at Liberty Capital Services. They are licensed mortgage brokers in Columbus, OH and able to do business in Ohio, Florida and California. They would be happy to take a look at your situation and help you consider all the variables. Call us at (614) 505-0620.