Wednesday, February 3, 2016

Refinancing Your Home: 4 Questions To Ask

Refinancing your home is a big topic. It typically requires a great deal of research and consideration, but it can lead to substantial savings if done wisely. When refinancing your home, you take out a new mortgage loan to pay off your existing one. Before choosing to refinance, we encourage you to ask several important questions. Here are a few to get you started, courtesy of the team at our Lake of the Ozarks bank.

1. Why Do You Want To Refinance?
Homeowners choose to refinance for a variety of different reasons. Some want to secure a lower interest rate so they can save money on interest. Others want to shorten their loan term (such as from a 30-year loan to a 15-year loan) so that it can be paid off sooner. Having a shorter loan term means you will spend less money on interest in the long run. Still others choose to refinance so they can change the type of loan they have (typically from an adjustable rate mortgage to a fixed rate mortgage) so they can protect themselves from changing interest rates.

2. What Are The Costs To Refinance?
Choosing whether or not to refinance your home is all about the numbers. If it won't save you money, don't do it. Refinancing comes with several expenses, so it's important to ensure that these costs won't outweigh the savings. Examples of some of these types of expenses include the mortgage broker's services, application, loan origination, home appraisal, home inspection, title insurance, and others. You will also want to find out if your existing loan charges a penalty for being paid off early. Even if refinancing will lower your monthly payment, you'll want to be sure that you plan on staying in the home long enough for the savings to outweigh these upfront costs.

3. How Do You Get Started?
If you plan to refinance, you will first need to ensure that you have a few key components in place: good credit score, equity in your home, verifiable source of income, and steady employment. You can talk to your current lender about refinancing options, but don't be afraid to shop around to find the best loan. Ask every lender to provide their estimates (along with interest rates and associated costs) in writing. Putting in the time to shop, compare, and negotiate can save you thousands of dollars.

4. Didn't Interest Rates Just Rise?
Some of you may be surprised to read a blog about refinancing right now, since the Federal Reserve recently raised the interest rate for the first time since 2008. However, it's important to realize that while the numbers did rise slightly, they are still very low. The current average interest rate on a 30-year fixed rate mortgage is 3.9%, and is expected to gradually increase this year. 10 years ago, mortgage rates were near 6.3%, and 20 years ago they were near 7.2%. While there is no immediate rush, now may be a good time to start thinking about refinancing to lock in the lowest rate possible.

Other Questions To Ask...
Other good questions to ask yourself before refinancing include: Have interest rates fallen since you secured your mortgage? Do you want to switch to a different type or different length of mortgage? Has your credit score improved? If you answered yes to any of these, it may be worth looking into refinancing. While it may seem scary upfront, it becomes incredibly manageable once you understand the process. 

On behalf of all of us at First Bank of the Lake, we wish you the best of luck in your refinancing endeavors! If there is any way we can be of assistance financially, please stop by our bank at the Lake of the Ozarks or give us a call at 573-348-2265. We look forward to serving you!

First Bank of the Lake - Striving For Excellence
Member FDIC. Equal Housing Lender.

Located at the entrance to the Osage Beach Premium Outlets!
4558 Osage Beach Parkway
Suite 100
Osage Beach, MO 65065

(573) 348-2265

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