As 2021 comes to a close, it might be the best time to consider your refinancing options rather than moving it to your list of New Year’s resolutions. Interest rates have ticked up in recent months, and the trend may continue, making a delay more costly as well.

If refinancing is on your mind, consider using winter time off to organize documents, assess your financial situation and begin the process of finding the right lender. Hopefully, these tips will help get you started.

What to Know

Before you consider refinancing, you’ll want to know how much equity you currently have in your home. Reviewing the balance on your existing mortgage, speaking to a real estate agent about comparable values in the area, and chatting with prospective lenders will reveal insight into some options, such as the viability of a cash-out refinance that allows you to access equity.

It’s also important to check your credit score. One of the purposes of refinancing is to lower your interest rate. The better your financial habits and history, the more significantly you will be able to do that. Starting early to address any deficiencies or correct any mistakes can add to your savings.

What to Ask

When comparing lenders, you’ll want to ask about more than just the interest rate you qualify for. You’ll also need to find out the cost of closing the loan. The cost divided by your monthly savings from a lower rate will determine your break-even point — how long you will need to maintain the mortgage before you start to benefit from refinancing.

In addition, you’ll want to ask about the options for the term of your refinanced loan. For example, you may have an opportunity to extend the new mortgage beyond the time remaining on your current one. While this will lower your monthly payment, it also adds to your interest charges over the life of the loan.

Private Mortgage Insurance (PMI) is another area where you should seek clarity. Refinancing could end your requirement to pay PMI if your home’s equity has increased enough, or it could become an added expense if you decide to cash out equity. Either way, the change will be essential to consider in your decision-making process.

What to Do

Regardless of your goals for refinancing, it’s crucial that you have a plan. Take advantage of the savings by deciding ahead of time how you’d like to use the extra money in your budget and do your best to follow through. If you’re hoping to use your home’s equity to pay down other debts, take some time to make sure your budget won’t land you in the same predicament in the future.

When pursuing a refinance of your mortgage, you should also avoid taking shortcuts. Refinancing with your current lender can minimize steps but may not offer the most savings or flexibility. Be sure to shop around to have the best understanding of your options and qualification requirements.

Start your search with all of the resources on our website or by calling to schedule a conversation with one of our experienced representatives today.