Are you a prime candidate for refinancing?
Face it – there are people who live for this kind of stuff, watching fluctuations in mortgage rates and frequently running refinance calculations, just waiting for the chance to pounce on a refinancing opportunity. Then, there are most other people too busy with living their lives to obsess over a mortgage refinance. And yet, refinancing can save you money for years to come, and in the process make that life you are busy living all the more enjoyable.
So, the answer is to narrow things down. Short of updating refinancing calculations every time there is a change in mortgage rates, there are some broader signs that you may be a good candidate for a mortgage refinance. If you fit the right set of characteristics, it might be worth taking a closer look at refinancing.
5 Excellent Candidates for Mortgage Refinance
Take a look at the following characteristics. If any remind you of yourself, then you could be an excellent candidate for refinancing.
People who bought homes between June of 2005 and December of 2007
Why that time slot? Well, that period was the peak of the housing bubble, and even though home prices have recovered somewhat, they still have not regained the level of those peak years. As a result, many homeowners who bought during this period have been unable to refinance because of under water mortgages – loans on which the remaining principal exceeds the value of the home. However, with the continued recovery in home prices and eight-to-ten years worth of principal payments having been made, more and more of these mortgages are emerging from under water. This could create a golden opportunity to refinance for these home owners, since mortgage rates between June of 2005 and December of 2007 were generally more than two full percentage points higher than they are now.
Homeowners who have improved their credit rating in recent years
The Great Recession was especially hard on the job market, and the ripple effects included unpaid bills that led to damaged credit ratings. In turn, bad credit created an obstacle to refinancing, so often people who needed financial relief the most were unable to get it. Fortunately, the job market has improved in recent years, and as people go back to work or find better jobs, they have the chance to improve their credit standing. If you have made this kind of progress, then you might have unlocked the door to refinancing.
Employees who recently got a substantial raise
A big raise is always welcome, but it raises questions about what to do with the money. Normally, investing that money would be a productive answer, but with interest rates unusually low and the stock market acting especially erratic, another possibility to consider is to use the extra income to pay down your mortgage more quickly. Now that you can afford a higher monthly payment, refinancing to a shorter mortgage could save you a considerable amount of money in the long run because it can secure you a much lower interest rate and result in your paying interest over fewer years.
Homeowners who just got married
Getting married can radically change your financial situation, especially if you both work. If you have two incomes now contributing toward the same mortgage payments you were meeting with one income previously, taking on the higher payments of a shorter mortgage becomes a possibility, with the resulting benefits described in the point above. Also, if you are going to share financial responsibility for the mortgage, refinancing can be a convenient opportunity to get both names on the loan.
Consumers planning to borrow money for home improvements
It may be a necessary repair or a new feature – fixing a roof or building an addition. Whatever the case, home improvements are generally big-ticket items and tapping into home equity can be one way to finance them. Before you simply take out a home equity loan, check to see if you can save money overall if you do a cash-out refinancing. If you can lower the interest rate on your existing loan, it can help offset the long-term cost of your home improvement projects.
Do you fit any of the above profiles? If so, you may be an excelllent candidate for mortgage refinance and you owe it to yourself to look into it.