New homebuyers are not the only people that can benefit from today’s low interest rates – refinancing mortgage rates for existing homeowners are low right now too.
Planning on refinancing your homes? Here are a few things you should know about refinancing mortgage rates:
What is a refinanced mortgage?
A refinanced mortgage is when a homeowner replaces their new mortgage with an entirely new loan featuring different terms. There are a number of different reasons why people choose to do this, including getting a lower interest rate, taking advantage of home equity, and consolidating debt. Sometimes refinancing is done simply to escape a bad contract.
Why are refinancing mortgage rates higher than regular rates?
Refinancing mortgage rates are low right now, but they are not as low as the rates available for mortgages on the initial home purchase. There are a few reasons for this. The first is a risk. Refinanced mortgages often carry a higher risk of default.
Lenders offset this by increasing the mortgage rate. Another reason for higher rates is the associated costs like appraisals and attorney fees. Lenders may also increase rates to offset some of their lost revenue from a shorter-term loan. As with mortgages in general, your credit score has a big impact on refinancing mortgage rates too,
Refinancing rates – fixed vs. variable:
One of the major reasons why people refinance their mortgage is to lock in at a lower rate. If you are attempting to refinance a fixed rate there are likely going to be penalties for breaking the terms of your loan. With that said, if your fixed rate is high and the current variable or fixed rate available is low, the penalty fee may be worth it in the long run.
Should I refinance my mortgage?
The answer to this varies based on a number of personal factors. How much do you still owe on your home? What is your employment situation? What does your existing mortgage agreement look like? What is your credit score?
Relying on refinancing to escape bad credit may simply dig you further into debt. If you are trapped in a bad mortgage but have steady employment and a good credit score, it’s probably a good idea to look at refinancing mortgage rates.