If you have been on the lookout for the best mortgage refinance rate in Utah, financial experts these days suggest looking for an interest rate that is at least 0.5 percentage point lower than the existing one.
Keep in mind that low interest rates shouldn’t be the only deciding factor, as closing costs may offset the supposed savings from interest payments over the new loan’s terms. As an example, a $100,000 fixed-rate, 30-year mortgage at 6% will incur around $109,871 on interest payments. Choosing to refinance it with a 5% mortgage will only bear a $95,483 interest, which brings the savings to approximately $14,400 less the number of closing costs for the new mortgage if there are any.
Things to Consider
Think about refinancing a mortgage when you plan to stay in your current home for a long time, ideally after the duration of the new lease. Otherwise, you can refinance a mortgage with a shorter timeline such as a 15-year loan with an adjustable rate. An adjustable-rate mortgage (ARM) can have a fixed interest for a specific time like 12 months or shorter before the interest becomes variable.
ARM loans usually entail a lower rate than other types of mortgages, but you should be aware that your monthly payments will cost differently. Your installment payment can be smaller in a particular month and higher in the succeeding one. Hence, this isn’t recommended for people who don’t want to worry whether or not they have to pay a more significant amount every month.
Your lapsed years from the current mortgage serve as another factor. It might be okay to refinance if you have paid the first year or two, but it’s a different story when you are already in the middle of the loan’s term. In other words, don’t refinance a 30-year mortgage with a 15-year loan if you are halfway through with the current one.
Aside from lower costs from a cheaper interest rate, homeowners who plan to refinance their mortgages can also consolidate other lines of credit on the property. For instance, it’s possible to combine a $20,000 debt with the new loan if you don’t have any idea about how to settle it in the next two years.
Some homeowners also refinance to use the loan proceeds for property renovations and upgrades. As home prices increase in Utah, this is an excellent strategy to increase the value of their homes and may even be profitable once they decide to put the house on the market.
In the end, homeowners in Utah who plan to refinance their mortgages should look beyond interest rates that are lower than the original loan. While prices are low, this means going back from paying a new loan and possibly losing the amount they spent on the interest from the previous mortgage. If you don’t mind this at all, you should only apply for refinancing from a well-established mortgage lender that can explain the benefits of taking out a new mortgage.