How do you know which to do? This decision can make or break you right? Put Your Home Equity To Work & Pay For Big Expenses. Refinance While Rates Are Still Low seems to be the Best solution for many… but let’s break it down a bit.
True, refinancing allows you shorten the lifetime of your loan and negotiate a lower interest rate—which can in turn reduce your monthly mortgage payment. But selling could make more sense financially, if your home’s gone up in value since you bought it.
You’re wondering, “Should I refinance my mortgage or sell?”—and it all depends on your credit, debt levels and current income, so weigh your options carefully before you sign on the dotted line for a deal that looks too good to be true.
Refinancing basics: What’s the advantage of getting a new mortgage deal?
How does refinancing work? Essentially, you’re paying off your existing mortgage and replacing it with a new loan that has better terms and interest rates.
Since refinancing and buying a new home (after selling) both involve getting a new mortgage, in each case you’ll need to .
And qualifying may not be as easy as you think.
According to Lundgren, “Banks are going to give you rates based on your credit and income. For example, if you’re retired, it might be a little bit harder to refinance, especially if you don’t have a lot of cash on hand.”
If you do qualify, the question becomes: “Which is financially better for me—refinancing my existing mortgage or selling my home and purchasing a new property?”
Mortgage evaluation 101: How to examine current rates and compare loans
If you’re considering refinancing or selling purely for the financial benefits (versus needing or wanting to buy a new home), the place to start is by comparing your existing mortgage rate with current ones.
This is easier said than done. While you have only one existing rate on your mortgage, there are dozens of current mortgage rates to compare it with.
Every mortgage lender determines its own rates, which is why experts recommend that you get quotes from a few lenders and brokers. Not only that, but those rates vary within each institution depending on the loan type. Loans also can vary DAILY! With EVERY Lender. So Locking in at the right time is essential.
For example, the same lender may charge 4.25% interest on a 15-year, fixed rate mortgage for a new purchase home, while charging 4.75% interest on a 30-year fixed rate mortgage.
Are the loan types you qualify for now better than your existing mortgage?
Lower rates aren’t everything.The type of loan you get is just as important. Remember, whether you sell and buy a new home, or refinance, you need to qualify for that new mortgage. This means that your lender will be looking at your existing financial data, including your current income, credit history, and outstanding debt.
If you’re making more money, carrying less debt, and have a better credit score now, you’ll be able to strike a better deal. For example, you may be able to replace your 30-year variable rate mortgage for a 15-year fixed mortgage.
But if you’re making less, carrying more debt, or having credit trouble, your chances for getting a good deal on a new loan are slim.
Case in point, refinancing could require you to give up your slightly higher fixed-rate mortgage for an only slightly lower variable rate one. Even though the new rate is technically lower, you may wind up paying more in the long run.
Before you decide if refinancing or selling is right for you, you’ll need to evaluate other costs that impact the savings over the lifetime of the loan. If you are thinking of Owning Board and Care facilities in small single family homes or smaller duplexes or Fourplexes, please contact me today Being both an RN and Nursing supervisor for over 100 other Nurses and families in board and care facilities and a Long-Time Realtor/Broker gives me the advantage of helping you on many levels!