5 Signs That It’s Time to Refinance Your Mortgage

Have you been giving some thought to how you might be able to save money if you refinanced your mortgage? How do you decide if it’s really worth it? Here are 5 signs that you might want to sit down with a banker and explore refinancing seriously. refinance your mortgage

  1. Interest rates are moving. If your mortgage has an interest rate that is several years old, it might be time to refinance. Mortgage interest rates fluctuate. If the Federal Reserve Bank raises interest rates, mortgage rates will likely follow.
  1. You have substantial equity in your home. Equity in your home can be accumulated by your monthly payments or by the value of your home increasing. Either way, it’s good news. You can ditch PMI (private mortgage insurance) when your home reaches its 80% loan-to-value ratio. A lower loan amount likely translates to a lower interest rate, saving you money on your payments.
  1. There is a positive change to your credit score. Bank loans often involve a cargo-shipload of paperwork, including your credit history. You may not have realized it at the time, but the interest rate on your conventional loan was based on your credit score at the time of application. A current, higher score usually translates to a better interest rate.
  1. Your income increases. The promotion comes through. A major client signs the contract. Your book was sold to a publisher. These are all good things that relate to more money in your pocket. Take that to the bank, literally. Secure a better interest rate based on your increased ability to repay the bank loan. Or you could refinance a 30-year fixed-rate loan to a 15-year one and increase your equity.
  1. Your relationship status has changed. Breaking up is hard to do. Throw real estate into the mix and things get complicated. Division of the assets usually includes the residence and that means each party’s share of said assets. Refinancing the home is one way of “buying out” the other party involved.

Know Your Options

Once you’ve decided to explore financing, think about the kind of mortgage you want. You’ll have a lot of choices. Below are some terms you should know in order to make a choice that’s right for you:

Jumbo Loans: Mortgage amounts greater than $453,100 are in most cases considered jumbo loans. (This limit is higher in certain areas.) These types of loans mean more money is doled out by the bank and consequently they’re riskier for the lender. Banks mitigate their risk by charging higher interest rates to borrowers.

Conforming Loans: Typically, a loan amount of $453,100 or less is called a “conforming loan” because it adheres to guidelines set by Fannie Mae and Freddie Mac, buyers of secondary mortgages. Banks will typically sell qualifying loans to these government-sponsored entities to free up cash.

Conventional Loans: Any mortgage issued by a lender, but not backed by the federal government. Both conforming and jumbo loans fall into this category, but only conforming loans sell on the secondary market.

Let’s talk about how refinancing can help you get a better rate, or move you closer to your financial goals.

Is It Worth It to Improve Your Home or Move On?

Homeowners are faced with numerous decisions throughout the years when it comes to their homes and how to manage them. A home is one of the biggest investments you’ll ever make, so decision-making shouldn’t be taken lightly. A difficult decision homeowners face is whether to move to a different property or simply improve their current one. improve you home or move on
The answer is never black or white, but we’ve listed the variables that need to be weighed carefully. Your personal finances and the status of local markets are just two issues you will have to consider. Also, think about which improvements give you the most bang for your buck.

Before taking the leap either way, here are some factors to consider:

Thoughts on Selling

  • Current market conditions. Is your area flooded with homes for sale? What is the transaction time from listing to closing?  Is the market lopsided with more sellers than buyers?
  • Local factors. Are there new jobs coming to your city or are companies moving away and jobs decreasing? Will there be an influx of new residents or is everyone trying to sell quickly? Will new jobs bring higher incomes or is downsizing a problem?
  • Your home value. What is your home’s worth? Can you extract from it what you paid or will you sell at a loss? What is the lowest offer you can accept? Will you be able to offer any help with the closing costs?
  • Personal logistics. Can you afford to move to a new house while paying the mortgage and other costs on the first, or do you have to sell first and then move? How long can you continue to pay the mortgage, taxes and insurance on this property?

Insights into Renovation

  • Current market conditions. Will increasing your home’s size or features price you out of the area? Sometimes putting in high-end finishes can make your home worth more than what it will appraise for.
  • Local factors: Are buyers looking for homes similar to an upgraded version of yours in that area? Don’t create a forever home when buyers move to your area for a starter home. It will be hard to make a profit this way.
  • Your home value. You can quickly put in too many renovations and create a home that is worth more than what the area dictates. Take that into consideration when planning your remodel.
  • Personal logistics. If you ever plan to sell, these are things to consider. However, if you feel that you’ll stay in your home for years to come, improving your property might be a wise move.

There’s not a magic formula to determine the right steps for every homeowner, but using a local real estate professional can be a great start. They know the markets and can explain the best options for you.

Is This Your Situation: Should I Buy a Home That Needs Repairs?

If you’ve found your dream home − in the area you want, with a big kitchen, three bedrooms and more − is it worth it to buy if the home needs a little TLC? The answer differs depending on the type of repairs, the neighborhood and more. Keep reading to find out if putting an offer on a home that needs repairs is the right move for you.home improvement

Are the repairs just cosmetic?

Don’t get confused between a fixer-upper and a house that just needs some minor, mainly cosmetic, repairs. A fixer-upper usually has a very cheap purchase price because the new owners will have to put in so much elbow grease to get it to livable condition. However, cosmetic repairs are another ball game. These are small tasks like painting, changing the carpeting or installing new cabinetry. If the home you’re interested in only needs cosmetic repairs, it may be worth the money because you’ll get to customize the home a little bit, and the seller might be offering a discount because the house needs a little TLC.

Check the inspection report

Get an inspection report before you buy. Maybe the seller told you that all the house needs is a fresh coat of paint and a little landscaping; but the inspection report could alert you to bigger problems that the seller either doesn’t know about or hasn’t disclosed. If the inspection report mentions foundation issues or that a new HVAC system is needed, this is not the kind of project you want to get into if you’re not prepared.

Will you get good ROI after the repairs are complete?

What kind of neighborhood is the home in? If it’s in a decent neighborhood, close to schools and parks, or if the neighborhood is up and coming, it might be worth buying a home in the area because the value will increase over time. It’s worth it to take on some minor home repair projects for a house in a desirable neighborhood.

Do you have the time to devote to this project?

If you weren’t previously planning on purchasing a home that needs minor repairs, make sure you have the time and patience to put up with the items that need updating. If you have a busy job or kids with demanding schedules, moving into a home that isn’t move-in ready could be stressful. Also, be prepared for loud noises and a little debris if you hire workers or plan to do repairs yourself.

Are you getting a deal on the home?

One of the most important factors is the type of deal you’re getting on the home. If it’s not move-in ready, what’s the incentive to do the repairs and updates yourself? If the seller isn’t offering an allowance for you to do the repairs or isn’t selling slightly below market to incentivize buyers, what’s the point?

Look into a 203 (k) loan 

If you find a home that you’re serious about but that requires minor or major repairs, look into financing through HUD’s 203 (k) loan. This type of financing allows you to finance the purchase of the home and the necessary improvements without having to seek multiple loans. Visit HUD.gov to learn more.

If you’re on the fence about making an offer on a house, call us today and we’ll help you decide if a home that needs repairs is the right option for you. Or if you have other questions about the home-buying process, we’re here to guide you!