Are you a homeowner? If so, you have the freedom to stay in the house or sell it whenever you wish. You also have the freedom to refinance your mortgage. Is refinancing a smart move? How do you know if you should go through with it? What factors matter when evaluating this decision? Here are four of the top factors that matter when considering a refinance.
The Interest Rates
The first factor that matters is interest rates. What is your current interest rate, and what interest rate could you get by refinancing? If you cannot move to a lower interest rate, refinancing might not be a great option. If you can achieve a lower rate, refinancing is often a wise choice. When you can refinance to a lower rate, you save money on your interest expenses. You can also achieve a lower monthly mortgage payment. In the long run, this can help you save a lot of cash.
Your Financial Position
The second factor that matters is your financial position. Can you qualify for a new mortgage? Lenders scrutinize a person's finances when they apply for loans, and they do this to minimize their risks. If you have a high credit score, a good job, and minimal debt, your lender might view you as a low-risk borrower. As a result, you should have no trouble qualifying for a refinance loan.
The Equity in Your Home
Lenders also factor in the equity a person has in their home when evaluating a refinance application. If you have no equity, you might face more challenges with refinancing. If you have a lot of equity, you might have an easier time. Additionally, with a lot of equity, you might have the option to do a cash-out refinance.
The Time You Plan to Stay There
The last thing that matters is your plans. Do you plan to stay in your house for a long time, or are you thinking about selling your house and moving? If you want to sell your house soon, paying the expenses for the refinance might not be worthwhile. If you plan to stay there for a while, refinancing might be a good choice.
If you are thinking about selling your home soon, you might not want to refinance. Instead, you may want to talk to a real estate agent. If you decide to stay in your house for a while and want to refinance, you can learn more about refinances by speaking with a mortgage lender.