by Kristy Como Armand
If you’re a homeowner, it may seem like everyone you know has refinanced or is talking about refinancing. Should you be considering it also?
Record-low mortgage rates have led to a refinancing boom unlike any other in American history over the past year, but according to data from Bankrate, a surprising number of homeowners are missing out on the opportunity to save. More than a quarter of current mortgage holders (27 percent) don’t even know their current rate, putting themselves in a poor position to determine if it’s worth it to refinance.
“With the low rates available right now, it’s definitely worth looking into refinancing to see if doing so would benefit your overall financial situation,” says Christa Comeaux, mortgage loan officer with Lakeside Bank. “It’s important to understand that when you refinance your mortgage, you are basically swapping out your old loan for a new one. The rate is important, but you also have to consider other factors when making this decision, including how much equity you have and how long you plan to stay in your home in order to determine if refinancing is right for you.”
Comeaux says people choose to refinance for different reasons, but there are some common money saving motivations for doing so, especially when rates are as low as they are right now:
While there can be many benefits to refinancing, Comeaux says you’ll still have to complete a loan application and pay closing costs, similar to the ones you paid when you got your original mortgage, along with any other fees the lender charges. If you’re looking to get a better rate or term by refinancing, she says to consider the break-even point: the length of time it will take for you to recoup the costs of refinancing. For example, if you expect to remain in your current home beyond the break-even point, then refinancing offers more benefits. If you don’t plan on being in the home past that point, the upfront costs of refinancing likely won’t outweigh the potential long-term savings.
“Your lender can help you weigh the benefits of different options. That’s why it’s important to choose a lender who will work with you. If you’re considering refinancing your mortgage, you can refinance with any mortgage lender you choose – it doesn’t have to be from your current lender,” says Comeaux. “Shop around for not only the best rates, but to find a lender who will take the time to look at your finances with you to help you get the most benefits from refinancing.”