With looming fears of interest rate hikes, many homeowners are wondering if they should refinance their Charlotte area home.Then they often ponder if they even qualify at all for refinancing. All important questions that deserve some serious discussion as it’s not in everyone’s best interest to refinance. First, let’s talk about what it actually means to refinance your property.
Definition of ‘Refinance’
1. When a business or person revises a payment schedule for repaying debt.
2. Replacing an older loan with a new loan offering better terms. (Source)
There are several different reasons a property owner may want to consider refinancing.
1. A better interest rate.
2. Negotiate an adjustable rate mortgage into a fixed-rate mortgage.
3. Cash pay out (using a portion of your home’s equity).
4. Dissolve PMI (Private Mortgage Insurance- often necessary for those that do not have a 20% down payment at time of original loan)
If you do decide to take the leap here are some important things to consider before you refinance your Charlotte area home.
1. Refinancing isn’t always the best answer.
When considering refinancing, write down all the fees associated with going through the process. There are appraisal fees, loan origination fees, possible points to pay and other miscellaneous closing costs. After going over all the costs involved it may not be cost effective to refinance.
2. Know your credit score.
Your credit score will determine if you get the best current interest rate. It may not be worth refinancing if your score would not lower your rate enough to balance all the costs involved.
3. Know your original loan restrictions.
Your original lender may have controls on when you are eligible to refinance your property. Often times you cannot refinance within 12 months of the origination of the first loan.
After considering all the above facts- are you ready to refinance?