As mortgage rates hit a historical low, you may be wondering whether or not you should begin the process of refinancing your mortgage. At Frank B. Pallotta Law Firm, we are here to walk you through your options and guide you in the best way we can.
Benefits of Refinancing
There are multiple advantages to refinancing your mortgage loan. If mortgage rates are exceptionally low to the point that it would lower your monthly mortgage payment, this would be a great opportunity for you to move forward with the refinancing process.
Another great reason to refinance your mortgage is to shorten your loan term from a 30 year loan to a 15 year mortgage loan. This could seriously accelerate your goals to having your home completely paid off.
If you have an adjustable rate mortgage (ARM), refinancing your mortgage could give you more predictable payments with a fixed-rate loan to lock in your rate for the remainder of the loan.
You Should Refinance If…
If you’re facing a cash flow issue then a cash-out refinance issue may be the best plan for you. You can read more about this option in our latest blog post. Since mortgage loans usually have lower interest rates and are tax deductible, this might be a good option for you.
If you have reached 20% equity in your home then it is time to refinance to eliminate the lender-paid mortgage insurance (PMI) premium that is built into your loan.
Lastly, if you need to remove a person from your mortgage usually due to a divorce or to remove a co-signer no longer needed, the only way to accomplish this is by refinancing.
What To Expect When Refinancing
Before you begin the refinancing process, there are a few things you’ll want to check first. Make sure you have at least 20% equity in your home. If you will still have to pay PMI even after you refinance for a lower interest rate, you will want to crunch the numbers to see if refinancing even makes sense for you.
You’ll also want to check to make sure your credit score is at least 760 and your debt-to-income ratio is 36% or less. This will give you the best chances to get the lowest interest rate.
Last but not least, be sure to calculate the break-even point and how refinancing will affect your taxes.
Ready to Call Your Real Estate Attorney?
If you think refinancing is the best next step for you or if you have more questions about what your options are, we are here to help you. Give us a call today and let our expert team guide you. With videoconferencing still in effect under COVID-19 Executive Orders, Frank B. Pallotta Law can make your refinance closing even easier.