What you need to know about Refinancing…

Rates are super low and have stayed that way all year. But if your interest rate on your current mortgage is higher than what is available right now, you might want to consider refinancing. Here are a few things you need to know about refinancing…

Cost to Refinance…

When refinancing there may be fees involved. When a lender quotes you an interest rate, make sure to ask for the fees involved. Make sure to do your homework to see if the amount of money you will spend on the loan origination fees to refinance will be worth it for the money you save on your new mortgage payment.


If you are planning on moving from your home within a year or two, be careful about refinancing. Do the math and your homework to make sure it makes sense to spend the money to refinance OR just wait to sell your home. Does the amount of money you save make it worth it?

NOTE: Keep in mind when you refinance, you start paying down the principal all over again. During the beginning of your mortgage most of your payment goes to interest.

Choosing the right path…

When you refinance, you might be able to choose a shorter loan term (15-20 years rather than 30). With this choice you can start paying down the principal sooner and pay less total interest. Before choosing a shorter loan term, make sure you can afford the payment. With a shorter loan term comes higher payments.

NOTE: Watch our for pre-payment penalties! If you are choosing a shorter loan term, make sure you know if there is penalty for paying of your mortgage early.

The Appraisal…

When you refinance, the lender will order another appraisal on your home to determine the current market value. This sometimes shocks homeowners with a price that is really low OR even higher than expected. This is a hurdle that you should be prepared for. If your appraisal is lower than expected, you can order a second appraisal. Talk to your lender and your real estate agent to get comparables of recently sold homes that accurately support a higher market value.

If you are thinking about refinancing, get more information on current interest rates. The are still super low, but if you purchased your home with a low interest to begin with it might not be worth it. Do the research and be prepared! See more on this topic HERE.


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