Home Refinansiering: Is It A Good Time To Do It Now?

Is Now a Good Time to Refinance Your Mortgage? | Money

If a person has got a housing loan, it is almost definitely one of their most significant financial burdens. And while financial experts expect the interest rates (IR) of these loans to increase after the COVID-19 pandemic, they are still pretty low compared to where they were pre-pandemic. It means it is still an excellent time for property owners to refinance their loans and save a lot of money.

Today, the average IR for a thirty-year fixed-rate remortgage is 3.30%, while a fifteen-year refi comes with an average IR of 2.60%. Even if people are no longer looking at the rock-bottom IRs from the start of the COVID-19 pandemic, property owners who are looking to refi their debentures can still find good savings. Here is why now is the perfect time for homeowners to refinance their loans and hot to know if it is the right option for them.

Want new lower IRs mean for property owners

With IRs rising from the rock bottom during the start of the Coronavirus-19 pandemic, the window of opportunity for getting savings out of current refi rates is gradually closing. Although housing loan rates are continuously changing week after week and unexpected increases or drops sometimes happen, the trend points to rising IRs in the future. But despite this, IRs are still below the pre-pandemic level, so people looking to finance can still be able to get excellent deals if they act as soon as possible.

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What is refinancing?

Refinancing housing debentures is when people take out new loans to replace their existing ones. They will keep their current home, but they will have a new housing debenture with different possible terms. A common reason to remortgage includes:

  • Getting lower IRs
  • Moving from adjustable to fixed-rate
  • Eliminating Private Mortgage Insurance or PMI
  • Increasing terms of mortgages to lower monthly amortization
  • Shortening terms of mortgages so property owners can pay them off a lot sooner

How do these things work?

When property owners refinance their housing debentures, they are getting new loans to replace their existing ones. They will have to go through most of the procedures similar to getting a new house – applying for loans, underwriting, closing, and home appraisal. Instead of looking for new homes, the main difference is that individuals will keep their current ones.

Just like when individuals apply for mortgages for a new home, they will need to submit applications and meet the lending firm’s requirements in areas like credit score, employment history, and debt-to-income ratio. When they refinance, borrowers can choose to go with their original lending agency or find new ones. They will also need to have the necessary equity in their house – usually at least twenty percent – to qualify for a refi plan.

Always keep in mind that you will also need to pay the closing cost and fee. It can be three to six percent of the debenture’s value. It can add up to hundreds, even thousands of dollars, so calculate the numbers to make sure that the money you will save in IR exceeds the closing fee or cost.

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Mortgage Refi Calculator

What is an excellent housing loan remortgage rate?

There is no set standard for an excellent refi rate. Usually, a refi rate should be at least one percent lower compared to the borrower’s current loan rate for a remortgage to make a lot of sense. Still, people will need to calculate the numbers to understand whether it makes sense for them financially.

To do this, individuals can calculate their break-even points. Since closing fees and costs can require a good amount of money in advance, they want to ensure that the funds they are saving with lower IRs are more significant than the amount they are paying to refi their mortgage.

By calculating these break-even points, borrowers can see how long it will take to get the upfront cost back for a refinance. If they decide to refi, they need to make sure they shop around with different lending firms to find the best refi rates.

People also need to keep in mind that even though average IRs are pretty low right now because of the COVID-19 pandemic, the specific IR they may get will depend on various personal factors such as debt-to-income ratio and credit score. A simple tip: Before jumping on the refi bandwagon, people need to take a look at their income stability. If they are not financially secure, they need to think twice or thrice before going on this journey.

Why should people remortgage now?

If a remortgage is part of your plans, now is a good time to do it. Here are some reasons why people should remortgage right now.

Lower interest rates

Today’s remortgage IRs are no longer at the bottom of the barrel level of the early days of the COVID-19 pandemic, but these things can still be an excellent deal compared to pre-COVID-19 times. But according to experts, IRs will rise, so the window of opportunity may start to close out sooner or later. The sooner people lock in IRs, the more likely they are to save money on these things.

We are starting to see economic recovery

In 2020, the COVID-19 pandemic-induced recession, as well as the resulting economic uncertainties, caused a lot of property owners to hold off refinancing their mortgages. Because the process can take a couple of months to complete, people worried about job security and stability may have felt that it is best to wait until the situation is more stable.

We are now seeing the start of the financial and economic recovery after almost three years of the COVID-19 pandemic. People who might not have been in a situation to refi the last couple of years because of the pandemic may not have a good chance.

When to remortgage?

To find out if you should remortgage, calculate the numbers yourself. It is an excellent time to remortgage if it is right for your situation financially. Look for savings of at least 0.50%, and make sure you feel pretty confident you will be able to cover the new monthly amortization for the entire term of the debenture. People also need to make sure that they are planning to stay in their homes long enough to recover the refinance cost. It is not worth spending a lot of money in closing costs to refi a house they are planning to sell sooner or later.