For many homeowners, refinancing can be a smart move. Make sure it’s right for you by answering the following questions first.
- What are my goals for refinancing? Are you trying to lower your total monthly payment? Pay off your mortgage sooner? Get access to accumulated equity? Your goals will help you determine what terms and interest rate to look for.
- What’s the value of my home? Get a free estimate at www.hfcu.org/homevalue. It’s free and easy to use. You can even sign up for quarterly updates by email.
- What is my equity? Check your latest mortgage loan statement to find your outstanding balance. Subtract the outstanding balance from your home’s current value. For example, if you owe $250,000 on a home worth $300,000, you have $50,000 in equity.
- Do I have other liens against my home? If you have a home equity loan or line of credit, the outstanding balance will be deducted from your equity.
- Is my home loan upside down? Current economic conditions have created negative equity situations, where you owe more than your home is worth. In this case, you may have trouble refinancing.
- How long do I plan to stay in my home? If you expect to stay in your home for several more years, refinancing may make sense. If you plan to move soon, you may not have time to recoup the costs involved in refinancing the mortgage.
- What are the current interest rates? Generally speaking, you may want to consider refinancing if you can get an interest rate at least 1% below your original loan rate. You may also want to refinance if you have an adjustable-rate loan and are concerned about future rate increases. A fixed-rate loan – even with the same or slightly higher rate, will bring peace of mind and could save you money.
- What fees are involved in refinancing? Find out about closing fees, appraisal fees, etc. You can see a list of the types of fees typically associated with a mortgage at www.hfcu.org.