Making Sense Of Refinancing

Interest rates have continued to remain low for the last year or more. As more people begin to take a proactive approach to their mortgages and lenders become more flexible in lending, refinancing offers have skyrocketed. Does this increase in refinancing offers mean now is a good time to refinance?

The Answer

It depends. Refinancing a mortgage can be a great way to lower the monthly payment, but it does come with some additional considerations.

Are you behind on your mortgage payment? If so, the chances that you qualify for a refinancing offer are slim. In this case, you may be better off seeking a loan modification or other mortgage debt solution.

Is your home considered underwater? If you owe more than the home is currently worth, you may find it difficult to obtain refinancing from your lender. Instead, try seeking help under the federal Home Affordable Refinance Program.

How is your credit? If your credit score isn’t high enough to qualify for a significantly lower rate, you may not be able to lower your payment enough to be worthwhile. Ideally, you want to obtain a rate that is at least 2% lower than the rate you currently have to have an impact on your monthly payment.

Can you afford the out of pocket expenses? Refinancing a mortgage requires you to take out a new mortgage loan, which is subject to closing, appraisal and down payment costs. These costs can run thousands of dollars and you should be sure you have enough money to cover these expenses before refinancing.