Refinance now. Secure the future.
Put yourself in a better place.
Refinancing your mortgage involves paying off your current home loan and replacing it with a new one. If you're getting ready to refinance, the mortgage experts at Rockland Trust can walk you through all your options. Why might you want to refinance? Here are some potential benefits:
- Reduce monthly payments: Refinancing to a lower interest rate means you pay less each month. You can use your savings to pay off your mortgage faster, pay off other bills or save up for something important to you.
- Lock in the interest rate: Do you have an adjustable-rate mortgage (ARM)? By refinancing to a fixed-rate mortgage, you'll have the security of knowing your rate will never reset to a higher rate.
- Shorten the loan terms: Are you in a position to make larger monthly payments? If so, you can refinance to a shorter term and pay off your mortgage faster.
- Use the equity in your home: If your home has appreciated significantly in value, you may qualify to take out a loan against that increased value. Known as "cash-out" refinancing, this option lets you finance home improvements — or even pay off debt on credit cards with high interest rates.
It all depends on your particular situation
To see if refinancing is the right move for you, consider factors like these:
- Home value: Refinancing rates and terms are based largely on loan to value (LTV), the ratio of unpaid mortgage principal to home value. For example, if you owe $150,000 on a home valued at $250,000, your LTV is 60%. A professional home appraisal can determine your home's value.
- Amount of equity in your home: As a rule, refinancing lenders require you to have paid down at least 20% of the appraised value of your home.
- Your credit: Lenders love to see an excellent credit rating. This can work in your favor, even if you have a high LTV.
- Your personal financial picture: Debt-to-income ratio is key here. Lenders calculate this figure by comparing your monthly pre-tax income with your total monthly debt obligations (including any additional debt you'd incur when refinancing).
Don't forget about the costs
Costs involved in refinancing home loans include:
- Appraisal fees
- Closing/attorney fees
- Recording fees
- Credit reports
- Underwriting fees
- Private mortgage insurance
- Loan origination charges
- Points (charges for "buying down" your interest rate)
When will you break even?
This is the key question. In considering whether to refinance, you must determine when the savings associated with refinancing balance out your upfront costs.
To calculate your break-even point, simply divide "refinancing costs" by "monthly savings." For example, if your costs are $6,000 and your monthly payments will be $200 less, then it will take 30 months for savings to balance out costs. Your break-even point is 30 months.
So if you plan to stay in your home for more than 30 months, then this particular mortgage will save you money over the long term. But if you expect to move within the next 30 months, you'll actually lose money refinancing.
For assistance in determining which option is right for you, please speak with one of our loan officers today.