Should You Consider Refinancing?

Is Now the Right Time to Refinance Your Home?

If you purchased a home with me in the last few years, you might be wondering whether refinancing is a smart move. Interest rates have fluctuated, home values have risen, and your financial situation may have changed. Let’s dive into when and why refinancing might be beneficial for you.

What Is Refinancing?

Refinancing means replacing your current mortgage with a new one—often to secure a lower interest rate, adjust your loan term, or access cash from your home’s equity.

When Should You Consider Refinancing?

Here are the top reasons why refinancing might make sense for you:

1. Interest Rates Have Dropped

A good rule of thumb is that refinancing is worth considering when mortgage rates are at least 1% lower than your current rate. However, even a 0.5% drop can be worthwhile if you have a large loan balance or plan to stay in your home long-term. A 2% or more decrease is almost always a smart financial move.

2. Lower Your Monthly Payment

If you want to reduce your monthly expenses, refinancing to a lower interest rate or extending your loan term can free up cash for other financial goals.

3. Pay Off Your Mortgage Faster

Switching from a 30-year loan to a 15-year loan can help you pay off your home sooner and save thousands in interest. While this may increase your monthly payment, it builds equity faster.

4. Your Credit Score Has Improved

If your credit score has increased since you first purchased your home, you may qualify for a significantly better interest rate, reducing your monthly costs.

5. Switch from an Adjustable-Rate Mortgage (ARM) to a Fixed-Rate Mortgage

If you started with an ARM and want the security of a fixed rate, refinancing can lock in a predictable payment.

6. Remove Private Mortgage Insurance (PMI)

If your home has increased in value and you now have at least 20% equity, refinancing can eliminate PMI, saving you extra money each month.

7. Access Your Home’s Equity with a Cash-Out Refinance

A cash-out refinance allows you to take out a new, larger mortgage and pocket the difference in cash. This can be a great way to fund home improvements, consolidate debt, or invest in other opportunities.

How Does a Cash-Out Refinance Work?

• You must have at least 20% equity in your home after refinancing.

• Most lenders allow you to borrow up to 80% of your home’s value.

• Your home will require a new appraisal to determine its current market value.

For example, if your home is worth $400,000 and you owe $250,000, you may be able to refinance up to $320,000 (80% of the home’s value), allowing you to cash out $70,000.

Things to Consider Before Refinancing

✔ Closing Costs: Typically 2-5% of the loan amount—be sure your savings outweigh this cost. ✔ Break-Even Point: Calculate how long it will take for your monthly savings to cover the refinancing costs. ✔ Loan Term: Refinancing into a longer-term loan may lower your payments but could cost more in interest over time. ✔ Your Future Plans: If you plan to sell in the next few years, refinancing may not be worthwhile.

Is Refinancing Right for You?

If you’re curious whether refinancing is a good option for you, click below to connect with Kevin Richardson, my husband, business partner and a trusted mortgage lender who will analyze your specific numbers and goals to see if refinancing makes sense for your situation. Whether you want to lower your monthly payment, access your home’s equity, or pay off your mortgage faster, we here to help you navigate your options.

https://www.umortgage.com/originators/2472513/kevin-richardson