Lisa Aflalo, Senior Loan Officer at NJ Lenders Corp., put together a special piece for our readers this month on the topic of refinancing your mortgage. Please contact Lisa if you are considering refinancing. She will guide you through the maze of options.
Now Is The Time To Refinance
The recent dip in mortgage rates has caused a surge in refinancing. With rates near historic lows, homeowners are smartly taking advantage of savings in a variety of ways:
- obtaining a lower interest rate;
- shortening the term of their mortgage;
- converting from an adjustable rate mortgage to a fixed rate mortgage, or vice versa;
- cashing-out home equity for home improvement, college, wedding or to purchase another property; and,
- consolidating debt (especially from high-interest credit cards).
There are closing costs associated with refinancing, so it’s important to weigh the savings against the costs, and consider how long the homeowner plans to stay in their home.
There is no magic rule regarding how much the interest rate must decrease to justify refinancing. Because of the wide range of loan amounts, a one (1) point drop may be required for a $100,000 loan; however, a half-point decrease may be worthwhile for a $500,000 loan.
A reduced interest rate not only helps homeowners save money, but it also increase the rate at which a homeowner builds equity in their home – a win-win scenario!
It’s best to refinance earlier in a homeowner’s mortgage term because payments primarily go toward interest in the early years of a mortgage.
Before deciding to refinance, a homeowner should speak to a loan officer to (a) check their credit (because credit scores impact interest rates), (b) discuss their goals for refinancing, (c) investigate their mortgage options, and, (d) evaluate whether refinancing is a good fit for their financial profile. A mortgage isn’t just a mortgage anymore – it’s part of a person’s whole financial picture. Refinancing may make that financial picture brighter!!
Lisa Aflalo, JD, CMPS, NMLS #66679
Senior Loan Officer
NJ Lenders Corp., Mortgage Banker