Rates are down and values are up, which most of us know is generally a good sign that it might be time to consider a refinance. However, there are several less obvious factors to consider that may also indicate that it’s a great time to refinance. Here are just a few:
1. You have mortgage insurance (MI). With the huge increase in property values the Phoenix area has seen over the past year, you may be able to get rid of your mortgage insurance. It is often difficult to work with a current lender to get this removed (as they expect to collect it for a number of years) even when property values have increased. If you find this to be the case, you may want to consider starting fresh. Additionally, there are options available that may allow you to decrease or remove monthly mortgage insurance even if your home value is above 80 percent loan to value. Bottom line: if your monthly payment currently includes monthly mortgage insurance, there is a good chance that you can get rid of that payment and lower your monthly expenses.
2. You have an adjustable rate mortgage (ARM). With the slight increase in rates we’ve seen over the past few months, it might be a good time for you to lock into a fixed rate. Rates are still at record lows that will likely allow you to obtain a comparable payment and of course you can always opt for a no-cost refinance if rates drop again. But by at least getting into a low-fixed rate mortgage now, you avoid getting “stuck” if rates are high at the end of the fixed period of your ARM.
3. Your credit score has improved. Since credit rating is a major factor in determining loan risk, if you’ve seen a significant increase since you took out your last mortgage loan, it may be time to see if there are better options available to you now.
4. You have a second mortgage, HELOC or other debt you would like to consolidate. Getting into a low, fixed-rate mortgage can often help borrower get rid of adjustable rates on second mortgages or even high interest credit cards.
5. There’s a little more room in your monthly budget. Maybe you paid off that car, got a raise at work, finally got rid of the last of those student loan payments... Well, some of the best rates available right now are on 20-, 15- and 10-year fixed-rate loans. If you are currently in a 30-year fixed or an ARM and you find that you are blessed with a little wiggle room in the budget, a shorter loan term could be your key to an early retirement. For example, a refinance into a 15-year fixed with a loan amount of $220,000 could increase your payments by as little as $450 a month, decrease your interest rate by as much as 0.75 percent from a 30-year fixed, saving you over $113,000 throughout the life of the loan repayment. Not to mention paying your loan off 15 years earlier.*
A mortgage is a big part of the overall financial picture and being in the right loan can make all the difference.
*Rates and terms are subject to change and availability. All loans are subject to full credit and property qualification. An Equal Opportunity Lender- Aaron Ely NMLS #260606 NationsChoice Mortgage NMLS #164626 & 376935.
• Ahwatukee resident Aaron Ely is a husband and father who has been serving the community through his involvement in his church as well as his daughters’ schools. He has been helping homeowners as a mortgage loan officer since 1999. Reach him at (480) 222-8848 or AaronE@ASmartLoan.com.