There’s been a lot of talk about mortgages lately, as first-time home buyers have enjoyed some of the lowest interest rates in years. However, current homeowners may also be able to take advantage of this economic trend through refinancing. How do you know if refinancing is right for you? Here are some factors to consider.
Historically low interest rates
As Nerdwallet noted, mortgage rates are still hovering at some of the lowest levels seen in years. That means refinancing your mortgage can result in lower payments even if the term period of the loan stays the same. This affords homeowners a unique opportunity for savings — one that has continued even after the Federal Reserve raised short-term interest rates in December 2015.
Your credit score
If you’ve been in your current mortgage for some time, it’s likely certain things in your life may have changed. You may have taken a new career opportunity or been offered a promotion that increased your salary and allowed you to pay off some of your debts. Or maybe you’ve finally paid off your student loans or bought property. If your credit score has improved since you first took out your mortgage, you may qualify for better interest rates. As Bankrate reported, borrowers with higher credit scores will be offered lower rates on their mortgages. A score of 740 or higher demonstrates your excellent fiscal responsibility, and your lender will reward you with a lower interest rate.
Increased monthly savings
A lower monthly mortgage may allow for budgetary changes for homeowners, including improved financial planning. This may mean taking the savings from your reduced payments and using them to fund a vacation or an important purchase, such as a new car. However, monthly savings can also be used for long-term spending needs. As CNBC reported, many homeowners take advantage of this extra cash to build up their retirement assets by investing it in their 401K plans. Your monthly savings may also go to improvements to your home or a college fund for your children.
At The Federal Savings Bank, we understand the importance of careful financial planning throughout the course of your mortgage. To find out if you could benefit from mortgage refinancing, please call us today for a free home evaluation.
Michael Adler is a Senior VP at The Federal Savings Bank and recently opened up the bank’s new Teaneck office. His office is located at: 206 W. Englewood Avenue. He can be reached at: 201-225-9301 or via email at: [email protected]. You can look him up at:www.thefederalsavingsbank.com/meyeradler. NMLS#28172.
