There is no doubt that mortgage rates are the lowest in recent years. You’re probably being bombarded with messages left and right to “Refinance Now” or “Lock in Low Interest Rates Today!

While there certainly is a fever in the air, the record low interest rate hype is worth looking into. If you are a home owner then Raleigh refinancing is an option that you should at least be considering. But how will you know if refinancing is right for you?

Just like any other major purchasing decision, you must examine the specifics of your current situation to determine if it’s a good move. You’ll need to look at the specifics of your current Raleigh mortgage
and home value to determine if you should refinance. Here are some points to consider:

What is your break-even point?

Ultimately you want to refinance when you can lower your interest rate enough to pay for (if not exceed) the closing costs before you plan to sell your home. You should at least break even on the investment.

Here’s a simple example. If you have a $100,000 Raleigh mortgage

and you can lower your interest rate by 1% in a refinance, you’ll save $1,000 a year. If your closing costs are $3,000, it will take three years to break even on your refinance. At that point, you’ll see real savings on your new monthly payment. If you can’t at least break even then you certainly do not want to refinance.

How long do you plan to be in your home?

If you’re settled into your home and expect to be there for at least five or more years, then you typically will see your refinancing investment pay off. However, if a move isn’t too far off in the future, then a new Raleigh home loan may note be right for you.

What’s your home’s value now compared to when you bought it?

In addition to closing costs, you may have to pay cash upfront when you refinance. Here’s why: If the loan-to-value ratio of your new loan is above 80%, a lender will probably require you to pay private mortgage insurance, which could wipe out the benefits of reducing your interest rate. You may also be ineligible for the lowest rates.

Suppose, for example, that you bought a home several years ago, when fixed mortgage rates were 6%. You paid $200,000 and put $10,000 down. You currently owe $180,000, but your home’s value has declined to $160,000. To refinance to a lower rate and avoid private mortgage insurance, you’d probably need to put in $25,000 to $30,000.

Points and Adjustable Rate Mortgages

If you incurred points on you current mortgage interest rate and your credit score has since recovered, then refinancing may be a great move. If you have an Adjustable Rate Mortgage (ARM) you should consider refinancing into a fixed-rate mortgage. Even if you have to write a check to pay for the closing costs, it’s worth it to avoid the risk that your payments could go up when the rate adjusts.

Is refinancing right for you?

If you are a home owner then Raleigh refinancing

is an option that you should at least be considering. Every home owner’s situation is unique and complex. While these points to consider can help steer you in the right direction, the best advice is to contact an experienced Raleigh mortgage broker to help you navigate through the process. Market Consulting Mortgage services all of North Carolina helping home owners find the best mortgage rates in Raleigh , Charlotte, Wilmington, and Jacksonville and beyond.

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Category: Finances
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