may 2022
Why Now Might Still Be a Good Time to Refinance Your Mortgage
When interest rates start ticking upwards you may wonder if it is a good time to refinance your home loan. While every person’s individual circumstances are different, there are several reasons why you still may want to consider mortgage refinancing.
1) When You Can Lower Your Interest Rate
Mortgage rates reached a historic low in 2021. Even though interest rates have increased slightly in 2022, it may still be in your best interest to refinance your loan, especially since most economists agree that rates are likely to continue to go up. A good rule of thumb is: if you can reduce your mortgage interest rate by 0.75 to 1.0 percentage points, then it may be worth it to refinance your loan. It is possible that by doing so, you will lower your monthly payment and save significantly over the life of your loan.
With Infinity’s Best in Market Rates, our members will always have one of the best refinance rates in Maine, based on a weekly Market Rate Survey by www.Rate-Watch.com and www.BankRate.com.
Lowering your interest rate by refinancing may also allow you to remove private mortgage insurance (PMI) from your monthly payment if a current appraisal determines that you have sufficient equity in your home.
Use our mortgage refinance calculator to find out how much you could save, or talk with one of our mortgage team members who will be able to analyze your situation and help you determine whether mortgage refinancing is right for you.
2) When You Can Adjust the Term of Your Loan
If your financial situation is such that you are now in a position to refinance your mortgage to a shorter-term loan (the number of years you have to repay the loan) this will allow you to pay off your loan faster and pay less interest over time. Although your monthly payments will likely be higher, a shorter payment term (like 15 years instead of 30 years) may also qualify you for a lower interest rate. At Infinity, the shorter the term of your loan, the lower the interest rate we can offer our members.
Conversely, you may want to extend rather than shorten your loan’s payment term by refinancing (for example, using the equity in your home to convert from a 15-year fixed interest rate loan to a 30-year fixed), reducing the amount that you pay each month. Keep in mind that although your monthly payments may be lower, you will increase the length of your loan as well as the total amount of interest you will pay over time.
Another refinancing option that changes the terms of your loan is to convert from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage. If you plan to stay in your home long-term, you may want to consider locking in to a fixed-rate loan, knowing that current interest rates are still relatively low and may continue to rise. Or you may also wish to refinance your current ARM to another ARM with a lower interest rate.
Use our Mortgage Term Comparison Calculator to compare the total costs of our fixed-rate and adjustable-rate mortgage options and to find the option that’s best for you.
3) When You Have Equity in Your Home and You Want to “Cash Out”
If you have enough equity built up in your home, you may wish to refinance into a new loan for a larger amount. The difference in funds would be available to you with no penalty. This is a good option for those looking to make improvements to their home (like that new porch or shed you’ve been daydreaming about) or to help you pay off debt. Keep in mind, however, that with this option, you will reduce the remaining equity in your home and if you choose to sell, this will impact the amount of your proceeds at closing.
4) When You Have Cash On-Hand and You Want to “Cash In”
The opposite of cash-out refinancing, cash-in refinancing is when a borrower refinances their current home mortgage by putting down a lump-sum payment on a new loan, reducing the total amount owed.
5) When You Want to Pay Yourself Back for a Cash Home Purchase
While not technically a refinance, there is one more circumstance when you may want to change the loan status of your home. If you paid cash for your home, and you now want to pay yourself or someone else back, you may want to use your equity to take out a mortgage. Instead of the funds going to the original seller at closing, the new mortgage amount would be payable to you. This is another reason why you might want to apply for a new home loan before the rates go up.
Closing Thoughts
With any new mortgage or refinance, there will be costs associated with the closing of your new loan. Infinity’s experienced mortgage team knows the Maine market and will help guide you through this process. Get started on your application today and be one step closer to your financial goals!