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Should I Refinance?

One of the most common questions we are getting over the past few weeks is coming from homeowners who are wondering if now is the time for them to refinance their mortgage. Interest rates have been very low and in the new we have all seen the the Fed cut its benchmark to almost 0%! Does this mean that we can get a mortgage for 0%?! 

We would like to answer some of the most common questions about refinancing here, but if you have particular questions unique to your personal situation, reach out to your TJ Lewis Real Estate agent and he or she would be happy to help!

Does a 0% Fed rate mean I can get that interest rate for my mortgage?

Unfortunately, no, you cannot get a 0% mortgage interest rate. The Fed rate does have an impact on mortgage rates but there not directly related. A reduced Fed rate usually means you can get a lower interest rate but they will not be equal for a number of reasons we will not get into here – ask you real estate agent or lender.

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How do I know if I should try to refinance my mortgage?

There are a few situations that if you find yourself in right now, you should consider refinancing:

  • Your current mortgage interest rate is above 4%. You can likely get a new lower rate and it should be worth it for you to refinance. 
  • You have equity in your home and you are looking to “Cash Out.” A cash out refinance converts some of the equity you have in your home to cash in your bank account. Your mortgage balance will increase but the you might be able to keep the same payment because of the lower rates or by adjusting the length of your mortgage.
  • You have an adjustable rate mortgage. Adjustable rate mortgages can be great for short periods of time but are not ideal for the long term. Your rate could go up significantly and is unpredictable. Refinancing to a low, guaranteed rate could be a good idea. 
  • You need to consolidate debt. This is similar to the concept of a cash out refinance but you are using the cash to pay off other, higher interest debt. Maybe you have an car note or student loan that has a higher interest rate – you could refinance to consolidate that debt to a single, lower interest payment with your mortgage.

Ok, at least one of those answers describes my situation, what should I do next?

  • Contact your lender to get some basic questions answered. Do they have a program for me? How long does their refinance process work? What interest rate could be available to me?
  • Check your eligibility. Just because you own your home right now does not mean you automatically qualify to refinance right now. Contact your lender to check your eligibility. 
  • Get your document in ahead of time. The process to refinance can take 30-60 days so getting your documents in ahead of time could mean that your lender is ready to lock your rate as soon as it reaches the right rate. Rates fluctuate and your lender can be watching for the perfect time. If you wait until rates drop to the right level for you and then start the application process, you might miss out.

Are there any other benefits to refinancing?

When you close on your new mortgage, your next payment is not due until the second month. So if you close on June 15th, your first payment should not be due until August 1st – you’ve effectively skipped two payments!

If you have a question about refinance your home or need help finding the right lender, contact your TJ Lewis Real Estate agent and he or she will be happy to help!