Homeowners should consider refinancing while interest rates are low. Refinancing involves some up-front expenses but can lead to dramatic savings on monthly expenses. It can take place with the current mortgage company that owns a loan or a entirely different bank. Below you will find Burlington MA mortgage refinance advice including the expenses and advantages of refinancing.
Determining When to Refinance a Home
Real Estate Market Conditions
The real estate market can determine your refinancing options. If property values dropped from when you originally closed on your mortgage, this may make refinancing more difficult. Banks ordinarily lend up to a specific percentage of the value of a home, which is determined by an appraisal. If your mortgage balance is higher than that percentage, you may have to bring down your balance in order to refinance. FHA loan holders have the benefit of a streamline refinance that does not require an appraisal. There are also special alternatives for home owners who are under water due to declining real estate values. A local mortgage professional can help you assess these different options.
Interest Rate Change
The traditional guideline is to refinance when the interest rate is at least one percent lower than your current rate. The monthly decrease in payment over the life of the mortgage would make it worthwhile. Also, some mortgage companies will not approve a refinance unless the savings exceeds a specific percentage.
Expenses and Other Considerations
There are fees that come with refinancing a home loan. These include closing costs, lender fees, pre-paid interest, and PMI, just to name a few. The cost can vary depending on the mortgage company and loan product. Request a estimate before refinancing and analyze it against the monthly savings. Also know that you will have a delay between when your current mortgage is paid off and the next one is due, so those funds can go towards your closing costs.
About Burlington MA Mortgage Refinance Advice
On top of the Burlington MA mortgage refinance advice detailed above, also think about how long you are likely to live in a home since the savings is typically realized when summed up over many years. Interest terms are also influenced by your personal finances and credit rating, so get information from a local mortgage professional for calculations on your specific situation. The guidance above is general and may not include everything involved with your home or personal finances.