Should you refinance your mortgage right now? Here, we discuss the questions home owners should ask themselves before refinancing.
Should you refinance your mortgage right now?
It’s common as a home owner to wonder if your current mortgage terms are still the best fit for you. Unfortunately, it can be tricky to determine whether or not you need to take any action. You might think now is the time to refinance your mortgage, but how can you be sure? Everybody’s mortgage is different, so there is no one-size-fits-all answer. However, here are some factors to keep in mind while you’re considering your situation.
Why do people choose to refinance?
People decide to refinance their mortgage for a variety of reasons. Each home owner’s situation is unique, so the circumstances around a refinance are often different and personal. However, when you refinance your mortgage, you should be doing so for a reason that will improve your current mortgage situation. This means people should not refinance unless they know what they want to change about their existing terms. For example, some home owners may want to shorten or lengthen their amortization period, while others hope to secure a better interest rate. Others still might want to renegotiate certain terms within their contract. The point of a refinance is to make your mortgage fit your needs better.
How do your income and employment factor in?
Before you refinance, you should consider how your job and income will impact this process. As you likely remember, lenders examine a borrower’s employment and income carefully before they agree to finance a mortgage. The refinancing process is similar. Your lender will want to know you can support a refinance and you are not at risk of being unable to meet your mortgage obligations. If your employment or income have changed since securing your original mortgage, this could affect a lender’s willingness to grant you a refinance. You should get in touch with a mortgage broker ahead of time to discuss your situation (more on that below).
Potential advantages of refinancing
We briefly touched on some of the benefits of refinancing above. These include changing your amortization period, securing a lower interest rate, or renegotiating your current terms.
Your amortization period is the length of time it will take you to pay off your mortgage. If you are in a position where you can afford to make larger or more frequent payments in order to pay off your mortgage faster, shortening your amortization period allows you to do this without facing a prepayment penalty. Similarly, securing a lower interest rate will save you money by reducing the amount you owe with each mortgage payment. You might also want to unlock prepayment privileges, or move between variable and fixed products. These are all actions that require a refinance and can benefit you long-term.
Are there any drawbacks?
The biggest risk of refinancing is improperly calculating the costs and savings. When you refinance your mortgage, you are breaking your existing terms. This will result in a penalty fee, and you need to make sure the refinance is worth this cost. You should be saving more money long-term than you will be sacrificing in the short-term. Otherwise, the refinance process is likely not worth it.
Always use a broker!
The most important thing to remember about refinancing is you shouldn’t try to do it alone. In order to make sure you are making the most out of the process and finding a solution that benefits you, you should get in touch with a mortgage broker. We can go over your current terms and discuss potential options for a refinance. We are there with you every step of the way so we can make sure your experience is successful.
A refinance can be a great way to improve your mortgage, but it’s important to get a professional on your team. If you have any questions about your mortgage, get in touch with us at Clinton Wilkins Mortgage Team! You can call us at (902) 482-2770 or contact us here.