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Is Now a Good Time to Refinance Your Mortgage?

Interest rates are still at historic lows these days, which makes it a potentially good time to refinance your mortgage. This is especially true if you’ve previously locked in at a much higher rate. The savings in interest payments could overshadow any penalty fees you may be charged for breaking your mortgage contract early.

Here is a quick guide to help you determine whether or not now is a good time to refinance your mortgage.

Calculate Your Mortgage Penalty
If you’ve got a variable-rate mortgage, you’ll most likely be charged three months’ worth of interest on your current mortgage balance. For fixed-rate mortgages, lenders will probably charge you an “interest rate differential” (IRD), using your current balance as well. This might be a complicated formula, so you may be well-advised to use a penalty calculator that many lending websites provide. Or else, you may want to give lenders at credit unions in Columbus Ohio a call to find out the exact amount.

Compare Your Mortgage Rate With Today’s Rate
In general, if you’ve got a five-year fixed-rate mortgage at over 5 percent, or a variable-rate mortgage at prime or higher, you might want to seriously consider a refinance. Basically, you want the savings from your new rate to be more than the fee associated with any penalty, in addition to any refinancing costs.

Add Potential Savings in Other Debt That Can Be Refinanced
In addition to your mortgage, there may be other debts on your books, such as credit cards, car loans, and so on. If you are planning to roll these into the new mortgage, Don’t forget to factor these savings too. Refinancing high-interest debt into a new mortgage can boost your cash flow and save you capital.

Speak with your banking professional to find out if refinancing today is right for you.

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