Earlier in January, mortgage rates fell to an average of 4.89 percent sparking a wave of refinancing applications. Although the rates have risen slightly since then, interest in refinancing home mortgages has remained high. While lower rates may mean larger savings to the borrower, not everyone can take advantage of the situation.Despite very attractive rates, homeowners need to thoroughly analyze their financial position before determining to refinance their mortgage. A question a borrower needs to consider is?
- Is your mortgage rate is a full percentage point or more higher than current rates? If your rate is at or above 6 percent, then it is a good time to think about a refi.
- What type of loan are you trying to refinance? Jumbo loans, for example, are much more difficult and costly to home-owners and thus may not net the same savings.
- What are the associated transaction fees the lender is charging? Higher fees mean fewer saving to the borrower. Consider the amount of time it will take you recoup the fees when considering a refinance on your mortgage.
Here are four things a consumer needs to understand to refinance their home mortgage in today’s market:
Your FICO Score - While 720 is still considered a good credit-score, it may not be good enough for to obtain the best rates. Don’t worry though, if you don’t have this score you can still refinance, it may just be at a higher interest rate.
Equity in Your Home – Having enough equity in your home right now can be a major sticking point. Unfortunately most homeowners are underwater, meaning the value of their home is less than they owe. Consider having a minimum 3 percent of home equity before refinancing.
Mortgage Fees – There are typically three options for paying for associated mortgage fees and how a borrower pays for fees may change the outcome of refinancing your loan:
- Pay the fees up front.
- Tack the fees onto the principal of the mortgage.
- Opting for a higher interest rate instead of paying the fees.
The key is to chat with your mortgage lender about structuring the fee payment so that it makes the most economic sense for you.
In addition to a solid credit score, enough home equity and consideration of the mortgage fees, borrowers will also need to be able to fully document their income in order to qualify for refinancing. Whatever you choose to do though, remember to be patient with the mortgage refining process; Refinancing your home during this significant period of industry downsizing will take time.
If you have questions with refinancing your Ann Arbor home, or other real estate questions or concerns, the Wickland Group can address your needs. Our experienced team of Realtors, marketers and support staff is here to help you with your real estate needs in Ann Arbor and throughout Washtenaw County. Expect only the best customer service and support from the team, taking all of the stress out of your real estate experience!
by Tammy Mayrened
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