If you are thinking about refinancing your mortgage, there are several things to keep in mind.
Top Reasons to Refinance Your Mortgage
What makes people want to refinance their mortgage in the first place? Refinancing offers the following benefits:
- Alleviating the burden of your mortgage insurance
- Opting for a shorter-term mortgage to save on interest payments
- Saving money on monthly mortgage payments
As you renovate your new home, its value, aka equity, rises. This means you can refinance your mortgage, removing mortgage insurance.
Have you been promoted? Have you found a new job with a higher salary? Congratulations! In this case, it could also translate into you paying off your mortgage faster. Opting for a 15-year or 10-year mortgage will help you save thousands of dollars in interest payments.
There are two different refinancing options available, with cash-out refinancing being an option that is primarily used when a homeowner needs money for big expenses. Examples of such expenses include medical or educational fees, large debts, and emergencies.
With this type of refinance, nothing changes on your mortgage except for either your interest rates or the duration of your loan.
In this case, you would take a new mortgage loan that would have new terms. It would consist of your remaining balance from your previous mortgage and the amount you took out as cash. This amount would depend on the equity of your home. The lender would have a final word on how much cash they are willing to lend.
Refinancing in 2023
Does it even make sense to refinance in 2023? If you were lucky enough to secure your mortgage in 2020 and 2021, when mortgage rates were at record lows, then the answer would most likely be “no.”
With mortgage rates currently reaching 7.63% on average for a 30-year fixed-rate loan and with no dip in near sight, it could only make sense to opt for refinancing if you either bought your home between mid-October and early November last year, when rates were at their highest, or you are thinking about cash-out refinancing for an emergency payment.
If you choose the route of refinancing your mortgage, our experts at HQM are ready to help you. We also came up with a couple of general recommendations that can benefit anyone looking to secure a better mortgage rate.
As a rule of thumb, refinancing is only beneficial if you can secure a rate that is at least 1% lower than your present rate. So what steps can you take to secure a better mortgage rate? Getting rate quote estimates from at least three lenders can help you make an informed decision. Improving your credit score might also go a long way toward helping you achieve better terms on your mortgage.
According to the forecast, mortgage rates will eventually start declining over the next two to three years, along with the rate of inflation. If you are considering refinancing now or in the future, our experts at High Quality Mortgage are always ready to help you secure the best rates. Contact us today!