Mortgage rates have fallen nearly to 8-year lows, and home owners everywhere are refinancing to take advantage. If you bought a home anytime in the last couple years, you may benefit greatly from refinancing your loan.
But how do you know for sure if refinancing is a good idea? How do you know if the timing is right? What should you consider when you think about refinancing your mortgage? Who should you talk to for advice?
These are great questions to ask your loan officer. At Front Range Heroes and Guardian Mortgage, we love having no-pressure consultations with our clients to help you decide what’s best for YOU (not us). Eligible heroes get up to a $1,500 Lender Credit towards your closing costs (must close in March 2020) and can close your loan in as little as 2 weeks (sometimes without an appraisal)! Veterans in VA loans get special terms on refinancing – no appraisal, no income/asset qualification, no debt ratio analysis, and the option to defer up to two mortgage payments, without any out of pocket costs upfront.
Here are the Top 5 reasons to refinance your mortgage:
- Get lower interest rates, lower monthly payments. By reducing your interest rate, you will save on your monthly payments and over time, perhaps tens of thousands of dollars will be saved. The market is cyclical (and impossible to predict) and sometimes the window to refinance is brief, so act quickly!
- Eliminate or reduce Private Mortgage Insurance. Your Colorado home has likely appreciated in the past 1-2 years. If you bought your home with a down payment under 20%, you may be paying PMI. It’s possible to refinance now and get rid of that PMI AND get a lower interest rate, saving you thousands. There are multiple ways to deal with PMI that you might not have ever discussed with your loan officer. Discover those options now!
- Get out of a pricey FHA loan and into a conventional loan. You’ll potentially save on MIP/PMI costs and could get a lower interest rate. Many home buyers who use FHA financing could have qualified for a conventional loan and just didn’t know about it. Did you know that the monthly insurance on an FHA mortgage is there for life (with one rare exception)? Especially if you have a higher credit score now than when you bought your home, it could be a great idea to make a switch.
- Remove a co-signer. Did you have a parent or family member co-sign on your mortgage, but now you could qualify on your own? You can refinance them off the mortgage and have it your name only, helping get the loan off their credit report. This is essential in a divorce.
- Switch from an ARM to a Fixed Rate. Did you buy your home using an Adjustable Rate Mortgage? Chances are you can refinance into a 30-year fixed loan for a lower interest rate than you got on your ARM, and your loan will now be much more stable for the long haul.
Still unsure if you should refinance? Only you can decide if refinancing is the right move, but there’s nothing wrong with getting some help. Your loan officer can lay out all the costs, savings, and run through a benefit analysis with you, with no upfront cost or commitments. One of the best ways we help clients determine whether to refinance or not is by going through what’s called a recoup calculation:
You simply take the monthly payment savings on the mortgage and divide it into the new cost of the refinance (closing costs). Figure out how long you think you’ll be in that home or in that mortgage. Will it take longer than that period of time to earn back the cost of the refinance through monthly payment savings, or less? The rule of thumb is you should always recoup your closing costs within 36-48 months after refinancing.
Have questions or an “out of the box” scenario and you aren’t sure what you should do? Contact us today for a no-pressure consultation!
Front Range Heroes has purchase and refinance programs for health care professionals, first responders, teachers, volunteers, and active duty and veteran military in Colorado. If you have ever been a hero at any point in your life, or if someone in your household is a hero, we’ll save you more money than ANY other program in Colorado, close your loan quickly, and provide the kind of experience you won’t find anywhere else. Find out what it’s like to work with a team that truly has your back!
EDIT: This post was updated March 2, 2020.