The What, Why, and How to Refinance Your Home Loan

A few months ago, we had a blog Should I Be Refinancing My Home Mortgage? Today, the answer is clear: yes. The current market is prime for refinancing on home mortgage loans. The mortgage refinancing market hinges on further economic data in the global market. However, a major market mover comes biologically.

In the midst of growing coronavirus (COVID-19) fears all over the globe, it has investors retreating to safer investments. As average mortgage rates continue to unwind (parallel to the 10-year treasury yield) to recent history record lows, it shapes up to be an opportunity for those with a current mortgage through refinancing. So far, according to the Mortgage Bankers Association, refinancing applications are up 165% on the year.

What Is Refinancing?

Refinancing is a refresh that gives you a new mortgage with lower monthly payments, a lower interest rate, a shorter term, or even a different lender. The rates that you locked in on your mortgage — whether last year or ten years ago — are not the same that they are today.

In looking at Freddie Mac’s monthly 30-year-fixed-rate mortgage data over the years, there is a widespread in annual averages just in the past two decades ranging from 7.44% in 1999 to 3.66% in 2012. If you locked in at a market rate in 1999 or other high times, you could be paying more per month than you need to be with the current available rates. Cutting the interest rate of your mortgage is a common reason for refinancing.

Why Should I Refinance?

Individuals refinance for two key reasons: to reduce monthly payments or to reduce the term of the loan. By refinancing a home loan, you use current market rates to your advantage for increased monthly cash flows. A reduced monthly payment or loan term allows for individuals to focus their hard-earned money elsewhere and also bolster their credit score. By slashing your monthly payments on your current home, you can better position yourself for purchases down the road with a reduced payment. Other homeowners also refinance in an effort to consolidate their debt or to utilize their current home equity for other large purchases.

Terms of every mortgage vary and it’s important to closely analyze if it is beneficial to refinance your current mortgage and if it’s for the right reasons. The refinance process doesn’t happen overnight and should be thoroughly evaluated prior to locking in.

How Do I Refinance?

Refinancing is not for everyone. There are still lending standards in place that make refinancing only suitable in certain situations.

Here at Chris Doering Mortgage, our team of mortgage loan experts can help you determine if a refinancing of your current home mortgage is right for you. We’ll walk through your current mortgage with you as well as your longterm goals. Once we learn more about your motivations, we can provide the right curated deal just for you. Get in touch with our outstanding team of mortgage experts to find out how you can cut costs with refinancing.