Mortgage rates are continuously changing, but new homebuyers are not the only ones who can benefit from low rates. When mortgage rates are low, future homeowners can save money in the long term by paying less interest. Current homeowners can also benefit from low mortgage rates by refinancing their homes.
Whether you’re looking for the right time to buy a new home or you want to refinance your mortgage, it’s essential to learn about what home refinance rates are, how they change, and how they can help you have a smarter, brighter financial future.
What Is Refinancing?
Your mortgage rate is the interest you pay with a mortgage, or a loan, for your house. When you refinance your home, you’re essentially applying for a new mortgage. The new loan subsequently pays off your old one. This is an enticing option because the new mortgage often comes with better terms that will help lower the amount of money you’re paying in interest.
But securing better terms isn’t the only reason you might want to consider refinancing. If you’re withdrawing equity from your home, then a cash-back refinance is the right move to make. With the money you get from your home, you can then use it to make a big purchase, such as a new car, or pay off any form of debt under your name.
Refinancing means you’ll have plenty of options for deciding what to do with the money you earn back or save.
Important Things To Know
Before you approach a mortgage lender about refinancing, there are some questions you need to ask yourself to make an informed choice.
First, calculate what refinancing will cost you. From time spent talking with lenders to the fees lenders will always charge, it’s best to get a clear picture of exactly how much you’ll have to pay to refinance. Other expenses may include appraisal fees, insurance, and application dues.
Another question you’ll want to discuss with a tax advisor is to see if your taxes will be affected. Every year, you’re able to deduct mortgage interest on your returns, but by refinancing, you’re also securing lower rates. As a result, your yearly tax returns may be affected.
Then, you’ll want to stay up-to-date on mortgage rates themselves. You can stay informed of weekly rates by contacting your lender and also checking with popular sources for this information, such as Freddie Mac’s weekly Primary Mortgage Market Survey.
“Refinancing will help you save money by paying less in interest.”
Freddie Mac writes an end-of-week overview of rates to help you stay up-to-date on the market – if rates are increasing, decreasing, or remaining relatively the same. Historical data can also help you make a better-informed decision regarding financing.
Why You Should Refinance
Ultimately, refinancing helps you save money by paying less interest. The money you save can be diverted into other areas in your budget, like a retirement account, your child’s college fund, or paying off debt. You may even find it beneficial to pay more on your monthly mortgage payments to shorten the time it takes to pay the loan off.
Do you have more questions about mortgages or refinancing? Contact your neighborhood mortgage bankers at Bank Midwest.
Originally published August 2016.