Answering Should I Refinance My Mortgage?

Answering Should I Refinance My Mortgage?

Should I Refinance My Mortgage?

Refinancing your mortgage is the process of paying off your existing mortgage and replacing it with a new one. Home owners refinance their mortgages for a number of reasons. If you have asked yourself, Should I refinance my mortgage?”, you may have come up with the following answers:answering-refi-resized

  • You would get a lower interest rate.
  • You can change the length of the mortgage.
  • You could move from an adjustable rate mortgage to a fixed rate mortgage.
  • You can access the equity in the home.
  • You want to consolidate your debt.

Obtaining a Lower Interest Rate

A great reason to refinance is to take advantage of lower interest rates. Historically, the general guideline was to refinance if you could reduce the interest rate by at least 2%, although given the already low rates, 1% may be enough of an incentive to do so.

Reducing your interest rate helps you save money by decreasing the amount of each payment and increases how quickly you build equity in your home.

The Effect of Brexit on Interest Rates

Before the Brexit vote on June 23 2016, many traders and investors believed that the Federal Reserve would raise interest rates at least once this year, according to Bloomberg research. But after Britain voted to leave the European Union, the likelihood of that interest rate hike occurring is incredibly low – if at all. This could be attributed to the economic uncertainty created by the result of the Brexit vote. This could cause the Federal Reserve to want to maintain the status quo for the time being, or even promote a feeling of positivity by possibly lowering the interest rate at their next meeting in July 2016.

If you are wondering, “Should I refinance my mortgage?”, then waiting to take advantage of lower interest rates can definitely help you save money. There are several programs available to certain groups to help them refinance their mortgage favorably regardless of any potential rate decreases.

The VA Streamline Refinance (IRRRL) Loan

VA loans are loans that have been designed specifically for veterans. They can be issued by any VA-approved lender and are backed by the federal government.

The VA Streamline Refinance loan, also called the Interest Rate Reduction Refinance Loan (IRRRL), allows you to refinance the interest rate of your current VA mortgage interest rate to a lower one. It simplifies refinancing by waiving the documentation, such as income, employment, and credit score verification, that most mortgage lenders require.

You can also roll your VA loan closing costs into the cost of the loan, letting you refinance with no out-of-pocket expenses.

To qualify for an IRRRL loan, you must:

  • Already have an existing VA mortgage.
  • Be current on your mortgage with a maximum of one 30-day late payment within the past year.
  • Have your new monthly payment for your mortgage lower than the previous loan’s monthly payment.
  • Not receive any funds from the IRRRL.
  • Indicate that you previously occupied the home in question.

Should I Refinance My Mortgage?

“Should I refinance my mortgage?” is definitely a question you should ask yourself periodically. Refinancing can be a great financial decision for anyone wanting to take advantage of lower interest rates or otherwise adjust their financial situation for the better. While global and national events can affect the economy, waiting for exactly right time to make personal changes can be challenging. Once you have decided to refinance, make sure you calculate the costs of doing so with your potential savings to ensure that refinancing is right for you.


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