It’s time to refinance if…


It’s in the news.  Mortgage rates are hitting record lows – again. If you fall into any of the categories below, it may be time to consider your refinancing options.


You have a variable- or adjustable-rate mortgage (ARM) Loan.

If you’re currently in an adjustable-rate loan and you have at least 80% equity in your home, this is the time for you to refinance.  Even if refinancing won’t lower your payment, fixing your interest rate and your payment could still save you a lot money in the long run.


Your rate is a half a percentage point above today’s rate.

As a rule of thumb, if your current loan is more than half a percentage point higher than current mortgage rates, you may save money by refinancing if you plan to stay in your home. Be sure to ask about closing costs and any points or fees associated with the loan.  Those costs could reduce or eliminate your potential savings.


You have a balloon payment.

A loan with a balloon payment has a remaining balance that must be paid off or refinanced after your term is completed.  For example, your payment is based on a 30-year amortization term; however, the loan itself is only for a term of 15 years.  If you have a loan with a balloon payment, consider refinancing to a traditional fixed-term loan.  It may not necessarily lower your monthly payment, but it will remove the balloon payment and help you lock in today’s low rates.


You have equity.

Home values are improving in most areas.  People that couldn’t refinance even a year ago are finding that they can now.  If you have been paying down your mortgage loan for some time and think you may now have at least 80% equity in your home, it’s worth the effort to lower your mortgage interest rate.  Your lender should be able to quickly assess your home’s market value to determine if you will be eligible to refinance; however, ultimately, a professional appraiser will be required in most cases to complete loan processing and confirm your eligibility.  Depending on your loan type, your lender’s requirements, and your approximate loan-to-value ratio, you may have to pay out of pocket for an appraisal.  An appraisal typically costs $300 to $500.


Call your mortgage lender as a starting point, or better yet, a real estate specialist at Pacific Service CU.  We’re happy to help.


by Hemlata, AVP, Real Estate

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