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What You Need to Know About Mortgage Refinancing in 2022
As mortgage rates continue to rise in 2022, many people are wondering whether or not it’s the right time for them to refinance their mortgages. In this blog post, we will provide a brief overview of what you can expect when refinancing in today’s market. Additionally, we will outline some key factors to consider so that you can make the best refinancing decision for your current situation.
Is 2022 a Good Year for Mortgage Refinancing?
Yes, refinancing in 2022 can be a great option for most homeowners. Even though current mortgage rates have significantly increased, they are still lower than what they have been in the past. On top of that, if you got your mortgage a while ago, you may be paying more interest than you would if you got a new mortgage today.
With that said, here are 5 things to keep in mind when thinking about refinancing in today’s market:
Improve Your Credit Score Before Refinancing
Your credit score is one of the key factors that lenders will look at when considering your refinancing application. If your score has improved since you originally got your mortgage, you may be able to qualify for a lower interest rate and save money on your monthly payments.
For instance, paying off your credit card debt is just one way to raise your credit score and lower your debt-to-income ratio.
Get a Cash-out to Refinance
In 2022, many homeowners have seen a large growth in their home equity. With a cash-out refinance, you can tap into the equity you’ve built up in your home to get cash for other purposes. This can be a good way to consolidate debt, make home improvements, pay off student loans, or just have some extra cash on hand.
Get Rid of an FHA Loan
With an FHA loan, most people are paying mortgage insurance premiums (MIP) for the life of the loan.
If you’re someone who has an FHA loan, you may be able to refinance into a conventional mortgage, which isn’t backed by the FHA, and get rid of your monthly mortgage insurance payments. This can save you a significant amount of money each month.
To qualify for this refinance, you will need to have at least 20% equity in your home and a credit score of 620 or higher.
Refinance to a 15-Year Mortgage
If you’re looking to save money on interest over the life of your loan, refinancing to a 15-year mortgage can be a good option. You’ll have higher monthly payments, but you’ll also build equity faster and pay far less in interest over time.
With a 30-year mortgage, it’s much harder to build home equity as quickly unless your home appreciates in value over time or you make extra mortgage principal payments.
However, some people would much rather prefer a 30-year mortgage if it means having lower monthly payments and the flexibility to pay bills on time. So, it really comes down to what each homeowner feels is best for their circumstances.
Makes Sure Refinancing Makes Financial Sense
For some people, mortgage refinancing may not be the right move in 2022. That’s because what might be worth it for one homeowner might not be worth it for another. For example, some people are okay with spending more money on interest if it means it will lower their monthly payments. On the contrary, others may prefer to pay off their mortgage sooner and therefore don’t mind the increased monthly payments.
Before you refinance, be sure to run the numbers to make sure it’s a good financial decision. There are costs associated with mortgage refinancing, so you’ll want to make sure the savings you’ll achieve will outweigh those costs. Typically, closing costs are between 3% and 6% of your loan amount so it’s crucial to take that into account.
You could use a mortgage refinancing calculator to figure out how much you could be saving monthly on your mortgage if you were to switch to a new interest rate and loan term. Be sure to compare the different rates and terms available, so you know what’s ideal for your financial situation.
After you figure out what your new refinance loan would be, you need to find out your break-even point. To do this, you will need to divide the associated fees with refinancing by how much money you would save each month. This will give you an idea of how long it will take for you to recoup your costs from the refinancing.
Talk to a Mortgage Broker If You’re Looking to Refinance Your Home
If you are a homeowner in the market to refinance your mortgage, be sure to reach out to 1st Eagle Mortgage. We have decades of experience helping homeowners get the best rates and terms for their mortgages. At 1st Eagle Mortgage, a mortgage broker will work with you to find the best refinancing option for your needs and ensure that the process is as smooth and stress-free as possible.
For more information on refinancing and 1st Eagle Mortgage, visit our website.
August 28th, 2022 by Herb Levin
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