The mortgage refinance is a great way to lower your monthly payments and get rid of any unnecessary costs. But many people are afraid about their finances, so they don’t know if it makes sense for them to refinance right now or not. This article is written with the goal of helping you understand what are the possibilities when planning a mortgage refinance.
When to refinance?
When should you refinance? There are many reasons why you may want to refinance your mortgage. Here are a few:
- You have an interest rate that is higher than current market rates. The average 15 year refinance mortgage rate today is 5.94%, which is below the average of the last 10 years (6.06%). If your current rate is higher than this, then refinancing may be beneficial for you if it lowers your monthly payment and saves on interest paid over time.
- You are about to reach the term limit for your current mortgage contract, meaning you will have no more payments left before returning all funds back to yourself or selling off the house at full value.*
Mortgage refinance basics
A mortgage is a loan that allows you to buy or build a home by providing funds for the purchase price and some associated costs. It also gives you access to the property as collateral, which means that if you fail to pay back this debt, your lender can repossess your home.
Refinancing is when you refinance an existing mortgage with another lender and take out additional money against your property to invest in other areas of life or renovate your home. This could mean lowering monthly repayments on interest rates or getting rid of other debts such as credit cards.
What are the costs to refinance?
When refinancing your mortgage, there are several costs that you may be required to pay. These fees can vary depending on the lender and the type of loan being used.
- Mortgage refinance fees: These include application fees, loan origination fees and appraisal fees.
- Title insurance: This ensures that property ownership is clear when you take possession of it after closing on the mortgage refinance deal. It also protects against any disputes over title or ownership of real estate between two parties claiming ownership interest in a given piece of land or property. You’ll need this document to get your new home loan approved by lenders; without it, they won’t go forward with helping you consolidate debt through refinancing efforts.
When does it Make Sense to Refinance?
The question of whether to refinance your mortgage depends on several factors, including the value of your home, how long you’ve owned it and what type of interest rate you currently pay on your mortgage.
If the interest rate on your primary residence is lower than 4.5 percent, refinancing can make sense. Other times when it makes sense include:
- If you’d like a longer term 15 or 30 years to better match the length of time for which you plan to stay in this house
- If your home’s value has increased since origination (this could mean that equity has built up).
There are many reasons and circumstances that can lead to the decision to refinance. The most important thing to remember is that it’s not always a good idea, especially if you don’t have an urgent need for extra cash or lower payments. But if your financial situation has changed significantly since you took out your mortgage and it will benefit from refinancing, then this might be something worth considering. Applying for mortgage refinancing with SoFi is a simple process that, like other loan providers in the market, can be completed entirely online.