Considering refinancing your mortgage?
In 2019 the U.S. economy ground to a halt as a result of the COVID-19 pandemic, and as interest rates hit rock bottom homeowners rushed to refinance their homes.
Action News Jax consumer expert, Clark Howard, says if you own your home, there’s a good chance you’re missing out on big savings.
The most important thing for you to do when you are doing a refi is comparison shop. Online lenders, and credit unions are a good place to start, and Howard suggests people try and avoid banks.
Clark Howard has a tool at clark.com that allows you to compare an offer from one lender to another to see which one is actually your best deal.
Some Questions to Consider First
- What is your current mortgage interest rate? If you took out a mortgage when rates were significantly higher than they are now, then you may be able to save thousands of dollars in interest over the life of the mortgage by refinancing.
- What is your remaining mortgage term? Are you locked into a fixed rate with this mortgage? Or are you in an adjustable-rate mortgage (ARM) that could see a fluctuation in rate in the coming years? If you’re looking to eliminate the uncertainty of a loan that can change based on things largely out of your control, a refinance into a fixed rate is probably a strong option.
- How much is your remaining mortgage balance? If you’re nearing the finish line on your mortgage and the remaining balance is relatively small, you may not want to add to the amount you owe by taking on closing costs that are associated with refinancing a loan.
- How many years are left on your current mortgage? If you’re itching to be debt-free sooner than you had originally planned, refinancing your mortgage could be a great tool for that. Moving from a 30-year loan to a 15-year loan, for example, will help you pay off your mortgage more quickly and likely will save you thousands in interest charges in the process. But use caution: Even with a lower interest rate, this is likely to raise your monthly payment.
- How long are you planning to stay in your current home? If you know that your family is likely to try to “upgrade” to a new home or you might take a new job in a different city sometime in the next few years, you may want to consider holding off on refinancing.
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