As your largest financial obligation, your mortgage loan is an area where it’s a good ideat to attempt to save money. Due to the coronavirus and the effects that it has had on the economy, the Federal Reserve Bank has lowered interest rates to their lowest in history. But does this mean that it’s a good time for you to refinance your home’s mortgage?
Why Refinancing Now is a Good Idea
The first thing you probably think about when you are considering refinancing your current mortgage is the money you can save over the lifetime of your loan. In addition, you could also significantly lower your monthly payments. This could free up more money for everyday expenses, home improvement projects or even doubling up on mortgage on occasion so you can pay off that debt even faster.
Other Ways That Refinancing Could Help You
It might surprise you to learn that saving money over the span of your mortgage and reducing your monthly payments aren’t the only benefits of refinancing. Depending on the length of the mortgage you choose, you might shorten its term so you’re able to pay it off more quickly.
If you currently have an adjustable-rate mortgage (ARM), you might not be fond of how your monthly payments can change. While the lure of a lower interest rate might have been what swayed you to opt for an ARM in the first place, it’s possible that you’ll qualify for a fixed-rate mortgage that has better terms now.
Private mortgage insurance (PMI) is required by most mortgage lenders when you aren’t able to put a down payment of at least 20 percent down on their home. Given the assurance of PMI, many lenders will assume more risk and finance more than 80 percent of the price that was agreed upon for the home. Refinancing the remaining portion of your loan could mean that you can eliminate this added expense.
When is Refinancing Not a Good Idea?
Just because interest rates drop doesn’t mean that refinancing is a good idea for everyone. A casualty of the COVID-19 pandemic is the havoc it has wreaked on the economies of nearly every country around the globe including that of the United States. While many companies have been able to accommodate the changes necessary to reduce exposure, there is still a great deal of job uncertainty.
If you are concerned about the stability of your job and/or your finances, it might be a good idea to run through some possible scenarios before starting the refinancing process. Doing so could help you avoid spending valuable time and energy attempting to refinance your home only to have it be denied because your company decided to shutter its operations, for example.
On the other hand, if you’ve decided that refinancing your mortgage is a good idea right now, start the process sooner than later. The expected volume that the mortgage industry handles this year is expected to jump from between $1.5 and $3 trillion to as much as $6 trillion so you’ll have lots of company.