To Refinance or Not to Refinance?

That is the question many people are asking themselves right now.

With interest rates at record lows, it may be the perfect time to do it. If you have an ARM loan you may have even experienced your interest rate dropping, which is great, but think long term. Rates will go back up, and your ARM rate will climb with them. If you plan to be in your home for awhile, you might be better off locking-in a fixed-rate now while they are low. On the other hand, if you are considering a move in the next year or two, don’t refinance your existing home.

If you have a fixed rate mortgage and are considering refinancing to a lower fixed rate mortgage, here are some pointers.

Get a Good Faith Estimate from your lender, and see if the monthly savings justify the closing costs you will incur. If you have the equity, you can finance your closing costs, but be aware that appraisals vary with market conditions. Market value differs from tax value, and the cost of improvements you may have made, do not necessarily equate dollar for dollar to appraised value. If you have the equity you can also take cash out when your refinance for home improvements, college expenses, paying off a second lien, etc.

Do you want to just lower your payment?

If you just want to lower your monthly payment and do not want to take cash out, you may qualify for a streamline refinance, which is quicker and requires less documentation than a regular refi. Depending on the loan type, FHA, conventional, or VA, some of these transactions may not require a new appraisal. FHA has recently changed its streamline refi requirements, so check with your lender to see what will be required in your case.

Don't wait.

One more word of advice, don’t wait for the bottom of the interest rate cycle, or you’re likely to miss it. Rates are very volatile, often changing more than once a day and they go up quicker than they come down. So if you get an estimate on refinancing that you like, consider locking-in, and don’t look back!

TEESIE HOWELL

PRESIDENTIAL MORTGAGE

804: 217-4925

teesie.howell@presidential.com