As summer comes to an end and life seems to settle back down it might be a chance to see if we can save some money by reviewing 5 signs you should refinance your home loan!

1. Your mortgage rate is at least 1% over current rates

One rule of thumb says that if your interest rate is more than 100 basis points (or 1%) above current rates, it makes sense to refinance. This applies to a large number of today’s homeowners, because current rates hover around 3.5%, yet roughly 38% of active home loans have interest rates above 4.5%. If it’s been a few years it might be worth sitting down and going over some numbers and options.

2. You’re paying mortgage insurance

When you first bought your home you might not have had the 20% down that all the media suggest you have. When putting down less then the 20% it results in your mortgage having mortgage insurance. Refinancing to a loan without mortgage insurance can save you hundreds of dollars each month.

Home values are continuing to climb, with the median existing single-family home price increasing in 148 of the 178 cities measured by the National Association of Realtors®’ latest Metropolitan Median Area Prices and Affordability quarterly study.

3. You’re planning to stay in your home for a while

Another huge sign is how long you plan on staying in the home. The reason: Refinancing costs money. If you’re refinancing a 30-year fixed mortgage, your closing costs will likely run about 2.5-3% your loan amount. You will need to live in the home long enough to recoup that money with your lower interest rate.

But for how long?

Generally you should to be able to break even within three years. One alternative: You could opt to do a no-cost refinance, where the lender covers the closing fees. However, doing so means you’ll be paying a slightly higher interest rate or you will need to stack closing costs on top of your loan, so you’ll want to crunch the numbers here as well to see what makes sense.

4. You want to shorten the life of your loan

The average home buyer gets a 30-year fixed-rate mortgage. If you can afford to go to a 15-year loan it will help save money because you will get a substantially lower interest rate. The down side is your monthly payment will increase, but you’ll save money over the long run.

5. You need a cash-out refi

Last but not least there is a great option to pull cash out of your home for unexpected bills, to pay off debt and remodels to increase the value of your home. The only trick with a cash out refi is once again you need a good chunk of equity in the home and the amount needed can vary depending on which loan type you are going with.

If these 5 Signs about why you should refinance your home loan seems like a good idea then please let me give you a FREE home refinance quote!

Clint Carver
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Clint Carver

Loan Officer at Beam Lending
Clint graduated from the University of Utah with a degree in English. His prior experience includes 10+ years working under the direction of an Architect. When not helping families and individuals through the home buying process he can be found golfing and spending time with his family. Licensed in Utah and Wyoming. NMLS#826251
Clint Carver
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