Homeowners in Delaware may be wondering if now is the right time to refinance their houses. Interest rates hit a historic low in 2012, and the rates are still low enough to make refinancing tempting for many. However, if a person decides to refinance, there are some drawbacks worth considering.
For instance, if a cash-out refinance is sought, the owner should ensure that he or she will be able to continue making mortgage payments in full and on time. It may not be worth it to refinance a house to get rid of credit card debt, since the risk of foreclosure may be more problematic than the risk of dinging a credit score for not paying off a credit card in full. Individuals should also consider that mortgage refinancing costs money. In 2012, the national average of the closing cost for a $200,000 loan was $3,754. It may not even be worth it to refinance a home if a person is planning to move within the next few years.
On the other hand, refinancing may be very beneficial for a homeowner with a variable interest rate. Switching to a fixed interest rate may save a person a significant chunk of money, especially if interest rates continue to rise over time. Refinancing may also free up some money for those who can responsibly pay off some outstanding debts while still making mortgage payments. With a lower interest rate, a person may also be able to get a shorter-term mortgage with an earlier payoff date without significantly increasing the monthly payments on the mortgage.
Many lenders like to see that a homeowner has made mortgage payments for at least a year prior to allowing that owner to refinance. If a homeowner needs assistance figuring out the logistics of refinancing, it may be a good idea to speak with a real estate attorney.
Source: KTBC, “Should you refinance your mortgage?“, September 02, 2014