If you’ve been watching mortgage rates fluctuate, you may have been feeling pressure to refinance your mortgage before rates climb.
Wait! Take a calming breath. Refinancing your mortgage should not be a knee-jerk decision based on one factor. There are other things besides interest rates to consider when thinking about refinancing your current mortgage.
What is Your Why?
This is a biggie. Why do you want to refinance?
Have you built up equity that you want to cash out? If so, what are your plans for that money? Are you going to make improvements that will add to the value of your home (a good reason)? Are you looking to finance that hot new sports car (not a good reason)? Are you refinancing in order to get rid of your PMI? Do you want to reduce your monthly payment? With a mortgage refinance in California, you are starting the clock all over again so your “why” is something you want to take very seriously.
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How Long Will It Take to Recoup Closing Costs?
A refinance is a whole new mortgage. Consequently, you will be paying closing costs again. If you’re trying to reduce your monthly payment, consider how long it will take you to recoup those closing costs with that drop in payment. The rule of thumb is that it makes sense to refinance if you will be saving at least 1 percent in interest rate but even then, you will want to take a closer look at your own financial situation to see if it makes sense for you.
Are You Looking to Shorten the Term of Your Loan?
If you plan on staying in your home, it may make sense to refinance in order to shorten your loan term. If rates have changed enough since you originally closed on your mortgage, this may mean that you won’t see much change in your monthly payment.
Depending on what your interest rate anticipation is, you may want to switch out for an ARM or lock into a fixed rate. These scenarios require taking a good hard look at your financial scenario and what you anticipate the market doing.
The same applies to home values. If you anticipate that home values may flatline or even go down, the last thing you want to do is max out your mortgage if you may end up selling in a down market.
Get Professional Advice
Your mortgage is a huge investment and deserves a well thought out strategy. If you are considering refinancing, your best bet is to speak to a professional California mortgage broker.
At Bridgeport Funding, we offer mortgage services in Walnut Creek and surrounding communities in the Bay Area. We would be glad to sit down with you and discuss your long and short-term goals and help you decide if refinancing makes sense for you.
Having the assistance of a home loan specialist can help you make an educated decision about refinancing your mortgage. We can run the numbers for you and make sense of your financial situation and what your home can bear. Contact us today at (925) 478-8630 to schedule a consultation.