Interest rates are low: Should I refinance?
With interest rates the lowest since 1969, many homeowners are asking: is now the time to refinance? This is a great question, and with the pandemic, now is a great time to take a hard look at your finances, including your mortgage.
Here are four critical items to consider:
1: Read the fine print.
Read your current loan documents and the fine print on any potential refinance loan. Certain loans may require your home to be your primary residence, and some loans may require you to be in that primary residence for a follow-on minimum period, such as a year. If you’re planning to refinance, and sell or declare a different home your primary residence, it may be against the rules.
2: Do the math.
A lower interest rate sounds like a great deal and your initial impulse may be to jump. Instead, take the 15 minutes needed to do the math. Calculate how much you would save with the new loan, and don’t forget the closing costs. If you plan to resell your home in a year or two, the closing costs may offset any gains in your new lower monthly payment through your refinance.
3: Shop around.
Tempting as it may be to refinance with your current provider, shop around. If you haven’t considered a credit union and have access to one, you can sometimes get a better deal. This is a serious financial consideration, and thus worthy of additional research and investigation.
4: There’s no rush.
With the ongoing economic and health crises, the Fed has indicated that interest rates could stay at this level through the end of 2022. Certainly if your monthly savings will be substantial, moving faster will be better. That said, the window of opportunity is long, and that gives you time to make any changes in a measured way.
Given the current situation, there are many difficult and tough things we are all dealing with. And, there are some new opportunities. Refinancing may be one of them. One size does not fit all in this situation, and we advise you to take detailed stock of yours.