Should I Refinance My Home?
Should I Refinance My Home?
Mortgage rates have been dropping lately and this had me wondering, "Should I Refinance My Home?" You see, in December 2013 my husband and I purchased a new primary residence. Although we have excellent credit, we obtained a rate of 4.325 because rates had increased from their low of 3.25 at the beginning of that same year. Oh well, bad timing on our part. Fast forward to mid-2014. Rates dipped down to about 3.625 and, as your Richmond VA Realtor, I was assisting many home buyers in buying their dream home while taking advantage of that amazing rate. What I wasn't thinking about was should I refinance MY home. Basically, I missed the boat.
Today's Mortgage Rates
As of this writing, today's mortgage rates hover around 3.75 with zero points and you can get as low as 3.5 with purchasing a buy down in the rate. When I realized this news, I immediately called my preferred mortgage lenders to find out the details. Then, once I confirmed the rates, I spoke with my husband and we crunched the numbers. Here is what that looks like for US: With our current rate of 4.325 we have a mortgage payment of about $2000. That includes all of our pre-paids, such as home owners insurance. If we refinanced at the 3.75 rate, our new mortgage payment would be approximately $1830. That is a $170 a month savings! So, should I refinance my home? Well, that $170 a month savings is A LOT over 30 years. But, there are several additional things we need to consider.
Things To Consider When Refinancing
There are a few things to consider when you are asking yourself if you should refinance your home. One is your amortization schedule. How long have you owned your house? I am not a financial advisor nor am I am mortgage lender, however it seems pretty safe to assume that if you have owned your home for 20 years it probably doesn't make sense to reset your mortgage to year 1. For my husband and myself, we have only owned our Salisbury home for 2 short years. Resetting that amortization schedule isn't going to hurt us. Another things we had to think about was how long we plan to stay in our current house. Since I am constantly searching homes for sale in the Richmond VA real estate market, I ALWAYS want to move! I see so many gorgeous properties that it is a hazard of the job. (Seriously, my husband jokes that one day he will come home and there will be a for sale sign in the yard. But, he isn't joking. It happened before!) So, we had to map out our future goals. After a long discussion, we decided to stay put. This makes refinancing all the more attractive to us. You don't want to refi just to move a year or two later. We plan to stay for at least 10 more years. So that $170 savings over 10 plus years makes sense. Finally, we had to take into account the cost to refi. When you do a refi, there are closing costs just like there are when you purchase a home. Closing costs were going to range from $3,000 to $5,000 for us. That is A LOT of money to bring to the table just to save $170 a month. After speaking to some great lenders, we found a provider that was offering ZERO closing costs on a refi. That sounded too good to be true, but after some research it is what it claims to be! So, the only closing costs we will have is our pre-paids/escrow. While we will still have to bring about $3000 to the table for this escrow, it is basically a wash because we will be refunded our current escrow amount.
The Refinancing Process
After considering all the above information, we finally had our answer to "Should I Refinance My Home?" For our situation, it was a resounding yes! So, what's the next step? First, we must connect with the lender and make application. That was super easy. All we did was go to the link provided by the lender and filled out some info such as our address, how long we have lived there, what we think our home is worth, our current mortgage balance, etc. Next, our lender reviewed the information and requested documentation. Fortunately, we keep pretty organized records and we able to get those docs in right away, which then allowed us to lock in the 3.75 rate. (We did not think it made sense for us to buy down the rate.) Now we simply have to wait for the appraiser to call and come take a look at our home to determine its worth. Since I am a Richmond VA real estate agent, I have a pretty good idea to the value of our home as I performed a market analysis and am very confident it will appraise. That being said, a real estate appraiser is the one with the power here! After our appraisal comes in, we will proceed to closing. We will go into the office and "sign away our lives" just as you do when purchasing a home for the first time. This is no big deal. We will be in and out in less than an hour. The refinancing process will take about 30 days, so it is easy peasy. Soon we will be $170 richer each month. We plan on taking those savings and possibly purchasing another rental property. (That's a blog post in itself. We own several investment properties and I find it a fantastic way to build wealth over the long haul!)
Consult A Mortgage Professional
Curious if refinancing is right for you? I recommend consulting your mortgage professional. Don't have one? No worries! Contact me and I will be happy to provide you with the names of several of my preferred Richmond VA mortgage lenders so you can find the situation that is right for YOU!
Richmond VA Realtor
Searching homes for sale in the Richmond Metro area and want to work with the best Richmond VA Realtor? Give me, Shannon Milligan at the RVA Home Team with Keller Williams Realty, a call today! I welcome the opportunity to help you achieve all of your real estate goals! Image courtesy of Image courtesy of Stuart Miles at FreeDigitalPhotos.net.