Should I Refinance?

How to know if refinancing is right for you

You may often hear people refinancing their mortgage loan. There are multiple reasons to pursue this financing option. We will walk through those to help you decide if this is right for you. Your lender can walk you through details specific to your financial situation. Blue Ridge Title Company would love the opportunity to work with you and your lender to help you close on your refinance.

Capture a lower interest rate

If you secured your original mortgage when interest rates were higher or when you were in a different financial position, you might be able to obtain a lower interest rate today. To understand what type of interest rate is available to you, you would need to talk with a lender. You will discuss your financial situation including: your credit score, amount left on loan vs value of your property, and the length of the loan you would like to secure. If you are able to secure a lower interest rate, you should consider the break-even point of the new loan. This will take into account the closing costs and any fees associated with setting up the new mortgage loan vs the monthly savings of your new loan. To calculate your break-even point, take your closing costs and divide it by the amount you save each month with the new terms. The equation will tell you the number of months it will take you to breakeven on setting up the new loan. Your lender can calculate this for you and provide this information to help with your decision making.

Shorten life of loan

If you originally set up a 30 year mortgage and have seen interest rates fall since when you closed on that loan, you may be able to refinance for a shorter term loan while maintaining a similar monthly payment. If you are comfortable with your monthly payments or paying extra toward principal, it is worth checking the rates on a 15 year mortgage loan to see if it is within your finances to capture the lower interest rate associated with those terms. This is not the right solution for everyone but worth discussing when you are pulling interest rates.

Converting to a fixed rate mortgage

If you opted for an adjustable rate mortgage(ARM) before, it may be a good idea to consider refinancing with a fixed rate mortgage as interest rates are at record lows now, and will likely only go up from here. This makes your investment safer.

Cash out refinance

There are times when you have paid into your mortgage and then you need access to those funds. For these circumstances, you can do a cash out refinance. This allows you to use the equity on your home toward another expense. This could be a college fund, a remodel on your home, or some type of emergency. Many lenders will caution you to select this option as it is increasing your years to pay off your mortgage and increasing your debt. You will be paying more toward interest on your home over the life of your loans.

Regardless of your reason for refinancing, Blue Ridge Title can help you complete this process. We previously walked you through our role in the closing process and the process is very similar for a refinance. We are here to make the refinancing closing smooth and uneventful so that you can walk away with your desired new mortgage loan terms.  

Blue Ridge Title Company is your local Morristown attorney owned and operated title company. Our team is here to service your residential and commercial real estate needs. We are efficient, knowledgeable, and experienced in the real estate closing process. Please reach out to our team for an effective and timely closing.