How do you know if refinancing your home is right for you?


As a homeowner, you may be wondering if you should refinance your home. There’s not a standard answer to this question as everyone’s scenario contains unique characteristics that have to be considered before making a decision to refinance an existing mortgage.

Here are some questions you can ask yourself to help you decide on whether a refinance is right for you: 

  1. What are you hoping to accomplish with a refinance?
    Determining what your goal is for pursuing a refinance can help you decide if a refinance is the right move. Maybe it’s lower payments or debt consolidation. Maybe you want to pay your loan off quicker with a shorter loan term or perhaps you have some home improvements that you need/want to make.
  1. How much will a refinance cost?
    Just like when you first applied for your initial mortgage, there will be closing costs associated with the refinance. In some instances, the cost of getting the refinance won’t outweigh the savings. So understanding what you hope to accomplish with the refinance will help you determine if the cost associated with refinancing is worth it in the long run.
  1. Are the current interest rates better than what I have now?
    If the current interest rates are higher than what your current interest rate is, the benefits of refinancing will likely be erased in most scenarios as you will probably end up with a higher monthly payment and you will be paying more in interest over the life of the loan. If this is the case and you aren’t in a position where a refinance is absolutely necessary, it would be best to wait and revisit the idea when interest rates come back down.
  1. How will refinancing impact your current and future budget?
    It’s important to know where your finances stand currently before going into a refinance. If you are hoping to shorten your repayment terms, your monthly payment will more than likely increase which can tighten your budget, leaving less money on the table for spending in other places each month. If your goal is to reduce your monthly payment, knowing how much of a reduction you need can help you determine if refinancing is worth the time and effort.
  1. What are your current mortgage terms?
    Before you begin looking for what kinds of refinances are available, make sure you know what your current loan terms are. Knowing your interest rate, if it’s a fixed or variable rate, as well as how long the term of your mortgage is, are all pieces that you will want to compare when it comes down to making your final decision in regards to refinancing your home loan.
  1. What is your credit score?
    Qualifying to refinance your home will be very similar to what you went through when you first applied for a mortgage. Credit is just one of those factors, but it is usually a main factor for lenders when they do an initial review to determine whether you qualify or not. Be sure to check your credit first. While every lender has different criteria for credit, most refinances require a credit score of at least 620 in order to proceed.

Conclusion: Only you can decide if refinancing your home makes sense! If you have questions or are considering a refinance, please feel free to reach out to us, we’d be happy to chat about your options. Contact us today!