Refinancing a Good Idea?

According to the Mortgage Bankers Association, the number of refinancing applications for the week ending August 23rd were up 167% compared to the same time last year.  The average 30-year fixed rate is now at 3.55%.  The numbers, both the average interest rate along with the number of applications, say it is a good time to look at your own situation and mortgage to determine if it is the right time for you to refinance.

Will rates linger at this new low or go even lower.  There is no crystal ball telling us if rates have bottomed out or may go lower.  Uncertainty in the political arena and indecision with trade wars is unsettling and remains unknown.  Analyze the value that refinancing may hold for you by looking at the following:

  • your credit score
  • your loan to home value ratio
  • how much will it cost to refinance
  • will refinancing create a solid benefit for you

A two-year payoff of any refinancing costs is considered good guideline to look at when weighing the idea of refinancing.

Home loans supported by the Federal Housing Administration — otherwise known as FHA mortgages — have many advantages for new homeowners or those who are repairing their credit. Because these loans are backed by the federal government, approved lenders who make FHA mortgages usually extend more favorable terms such as lower credit score and down payment requirements.

If a streamline refinance is available with a 15 or 20-year term, you should be able to improve your cash-flow position to a fair degree without seriously increasing the long-term capitalized cost of owning your home. It should be noted you must have a second mortgage against your home, since your original mortgage from 1993 should be paid down well below the $124,077 you claim your new loan would be. Even so, using a 20-year term for your refinance would only extend the total payoff of your loans by perhaps two years, while your monthly payment would drop from $1,042 to $836 per month — not as pronounced a drop, but sizable, nonetheless.

Be sure to check out Who’s Buying in 2019