Reasons to Refinance When Rates are Rising
While it may not be the right time to refinance for all homeowners, some situations make it the ideal time to refinance. Below are a few scenarios where refinancing your mortgage makes sense even during times of rising rates.
1. Your ARM is due to reset soon
If your adjustable rate mortgage (ARM) is due to reset within the next year or so, switching loans now could save quite a bit. Whether switching to a fixed-rate mortgage or another ARM, changing your about-to-expire ARM means that your rate is guaranteed for a longer time, despite market fluctuations.
2. You want to consolidate loans
Student loans, medical bills, and credit cards typically have higher interest rates than even the highest mortgage rates. If you are looking to save money by consolidating your loans into a lower interest rate mortgage, refinancing can make it happen. You'll also have the convenience of getting rid of multiple payments. Sometimes the additional cost comes from accidentally missing a payment, resulting in late fees.
3. Your credit improved
If your credit score has increased since you first got your original mortgage, then refinancing could make sense. The best rates and loan programs are often reserved for those with favorable credit scores. So, if you couldn't qualify for a special home loan program before, you could be eligible now!
Depending on when you first got your loan, there could be new programs now that didn't exist before. This is often the case in the mortgage industry --new home loan programs are available and eligibility standards adjust as the market and regulations change.
4. Your income has increased
If your income has increased since you last qualified, your debt-to-income ratio has likely also changed. More disposable income with little to no difference in your debt makes you much less of a "credit risk." And just like the above scenario, you'll likely qualify for mortgage programs this time around that you didn't before.
So, if you've gotten a raise, your spouse has gotten a raise, or if you changed employment where you earn more, then refinancing your current mortgage may be right for you.
5. Your home is in a "hot market" area
If you live in an area where property values are rising, and you want to use your home equity, then you'll want to consider a cash-out refinance. Remember that property is an investment and the "earnings" from rising home values is often your best option when you need cash. Use the money to make home improvements, help pay for your children's college tuition, start up a business, or anything else where a lump sum is needed.
Everyone's financial situation and goals are different, and truthfully, it may not be in your best interest to refinancing your loan at this time. Contact us today for an honest, fast, and personalized refinancing assessment.